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1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/ X / Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) For the fiscal year ended November
3, 1995
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (No Fee Required) For the transition
period from to
----------------------- ----------------------
Commission File Number: 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 10020-1579
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 704-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- -------------------------
12-3/8% Senior Subordinated Debentures, Philadelphia Stock Exchange
due July 1, 1998
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
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 (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the common stock held by non-affiliates of the
Registrant as of January 16, 1996 (based on the closing price on the NASDAQ
National Market on that date) was approximately $123,000,000 (based on the
number of shares outstanding on that date exclusive of all shares held
beneficially by executive officers and directors and their spouses and the
Registrant's Savings Plan and Employee Stock Ownership Plan, without conceding
that all such persons or plans are "affiliates" of the Registrant).
The number of shares of common stock outstanding as of January 16, 1996 was
9,687,543.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 1996 Annual Meeting are
incorporated by reference into Part III of this Report.
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PART I
ITEM 1. BUSINESS
General
Volt Information Sciences, Inc., a New York corporation, incorporated in 1957,
and its subsidiaries (collectively "Volt" or the "Company", unless the context
otherwise requires) operate in the following industry segments:
(1) Technical Services and Temporary Personnel - This segment provides employee
staffing services, including temporary help, employment and personnel placement
services, technical personnel placement, payrolling and employment outsourcing
services, and other contingent staffing services, as well as some permanent
placement services, to industry and government;
(2) Electronic Publication and Typesetting Systems - This segment designs,
develops, manufactures, markets and services computerized imagesetting and
publication systems and equipment. On October 5, 1995, an Agreement and Plan of
Merger was signed which provides for the merger of the business of this segment
with that of Information International, Inc. with Volt owning approximately 59%
of the combined company. (see page 8);
(3) Telephone Directory - This segment provides telephone directory production,
commercial printing, database management including sales and marketing services,
licensing of directory production and contract management software systems and
is an independent publisher of telephone directories;
(4) Engineering and Construction - This segment provides inside and outside
plant construction, business communication engineering, telecommunication system
installation and other support services for the telecommunications industry; and
(5) Computer Systems - This segment designs, develops, sells, leases and
maintains computer-based directory assistance and other data base management and
telecommunications systems and related services for the telephony industry and
provides services to public utilities emphasizing computer-based projects.
Joint Ventures
The Company is a party to a joint venture, which commenced operations in July
1991, with Telstra Corporation Ltd., the Australian government-owned telephone
company, and others for the marketing, selling and compilation functions of
yellow pages directories throughout Australia.
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 by acquiring an interest in 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.
Information As To Industry Segments
The following tables set forth the relative contribution of each industry
segment to the Company's consolidated sales and operating profit (loss) for each
of the three fiscal years in the period ended November 3, 1995, and those assets
identifiable within each segment at the end of each of those years (see Notes J,
K and L of "Notes to Consolidated Financial Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA
November October October
3, 1995 28, 1994 29, 1993
--------- -------- --------
(Dollars in thousands)
SALES
Technical Services and Temporary
Personnel:
Sales to unaffiliated customers $570,514 $433,443 $340,301
Intersegment sales 1,832 1,067 1,304
-------- -------- --------
572,346 434,510 341,605
-------- -------- --------
Electronic Publication and Typesetting
Systems:
Sales to unaffiliated customers 69,608 64,659 57,081
Intersegment sales 797 664 2,259
-------- -------- --------
70,405 65,323 59,340
-------- -------- --------
Telephone Directory:
Sales to unaffiliated customers 68,086 72,319 76,924
Intersegment sales 1,681 1,836 2,020
-------- -------- --------
69,767 74,155 78,944
-------- -------- --------
Engineering and Construction:
Sales to unaffiliated customers 67,179 51,391 46,417
Intersegment sales 811 1,285 1,056
-------- -------- --------
67,990 52,676 47,473
-------- -------- --------
Computer Systems:
Sales to unaffiliated customers 131,920 (a) 99,059 (a) 37,385
Intersegment sales 40 76 196
-------- -------- --------
131,960 99,135 37,581
-------- -------- --------
Eliminations of intersegment sales (5,161) (4,928) (6,835)
-------- -------- --------
Total sales $907,307 $720,871 $558,108
======== ======== ========
OPERATING PROFIT (LOSS)
Technical Services and Temporary Personnel $28,117 $16,337 $7,360
Electronic Publication and Typesetting Systems 456 1,334 2,040
Telephone Directory 1,506 6,695 8,153
Engineering and Construction 6,178 792 (1,128)
Computer Systems 6,395 (2,168) (8,549)(a)
Eliminations (159) (8) (310)
-------- -------- --------
Total operating profit 42,493 22,982 7,566
Interest and other income - net 1,055 790 2,125
Equity in income (loss) of joint ventures (1,000) 3,055 4,940
Gain on sale of joint venture 9,770
General corporate expenses (9,408) (9,263) (8,769)
Interest expense (6,045) (7,468) (11,078)
Foreign exchange gain (loss) - net 186 (39) (378)
-------- -------- --------
Income (loss) before income taxes, extraordinary
item and cumulative effect of a change
in accounting $27,281 $19,827 $(5,594)
======== ======== ========
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
INDUSTRY SEGMENT DATA--Continued
November October October
3, 1995 28, 1994 29, 1993
-------- -------- --------
(Dollars in thousands)
IDENTIFIABLE ASSETS
Technical Services and Temporary
Personnel $ 52,955 $ 40,230 $ 30,248
Electronic Publication and Typesetting
Systems 37,532 36,276 32,350
Telephone Directory 32,135 28,941 31,830
Engineering and Construction 31,812 21,836 19,547
Computer Systems 44,887 50,273 39,394
-------- -------- --------
199,321 177,556 153,369
Cash, investments, joint ventures
and other corporate assets 64,690 49,348 82,523
-------- -------- --------
Total assets $264,011 $226,904 $235,892
======== ======== ========
(a) The results of operations for fiscal 1993 includes a pretax charge of
$6,400,000 for estimated costs in excess of anticipated revenues under
contracts for two major directory systems. This represents the loss
incurred on such contracts. The completed contract method of accounting
was used for these contracts and, as a result, revenues and the related
costs (other than those costs in excess of anticipated revenues recognized
in 1993) are recognized in income in the year of acceptance by the
customer. In fiscal 1994 and 1995, the Company received customer
acceptance under such contracts, which, because of the pretax charge in
1993 related to such contracts, had no effect on the Company's earnings
for 1994 and 1995 although revenues (and costs) of $59,000,000 and
$15,000,000 were recognized in 1994 and 1995, respectively.
- 4 -
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Technical Services and Temporary Personnel
Volt's Technical Services and Temporary Personnel segment provides, from
approximately 160 offices located throughout the United States, a broad range of
employee staffing services, including temporary help and other contingent
staffing services, employment and personnel placement services, technical
personnel placement, payrolling services, employment outsourcing services and
employee leasing services, as well as permanent placement services, to a wide
range of customers. Except for professional employer services, which are
marketed under the name "Shaw & Shaw", the remainder of this segment's services
are identified and marketed throughout the United States as "Volt Services
Group".
Volt Services Group
Volt Services Group is a single-source provider of all levels of temporary
help, offering to customers an extensive range of contingent employment
services as a full-service supplier, including providing outsourcing
services, as well as assuming full responsibility for staffing,
supervision and the management of large projects.
Volt Services Group provides contract engineering services, professional,
engineering, design, data processing, scientific and technical support
personnel and temporary help in administrative, clerical, office
automation, accounting, industrial and other job classifications, for
varying periods of time (both short and long term), to companies and other
organizations (including government agencies) in a broad range of
industries which have a need for such personnel, but are unable, or do not
choose, to engage such personnel as their own employees.
Volt Services Group has been successful in obtaining several large
national contracts which typically involve servicing numerous customer
facilities, on-site Volt representation and customized
invoicing/management reports. Employees assigned to a single customer
under a national account range from light industrial to high level
engineers or Information Technology professionals, depending upon the
customer's requirements. A single contract could have as many as several
thousand Volt Services Group employees at one time providing services to
the customer. The bidding process for national accounts is very
competitive and Volt is usually in competition with all major temporary
service firms. Most contracts are for a one to three-year time period, at
which time they are typically rebid. Others are for shorter periods and
are defined in terms of the duration of a particular identified project or
subproject or a particular need which has arisen which requires additional
or substitute personnel and, simply expire upon completion of the project
or when the particular need ends. While Volt has no assurances that it
will maintain the accounts that it currently has nor that it can obtain
additional accounts on satisfactory terms, this segment maintains a group
dedicated to the acquisition, implementation and follow-up of national
accounts.
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Volt Services Group provides personnel to companies throughout a broad
spectrum of industries, including the computer, electronics,
manufacturing, aerospace, defense, telecommunications, utility, power
(including certain nuclear and fossil fuel power plants), architectural,
engineering, transportation, petrochemical, chemical, retail, finance,
banking, insurance and marine industries and to government agencies and
universities. Most customers are located throughout the United States, but
a small portion of the segment's services are performed outside the United
States.
Volt Services Group furnishes temporary employees to meet various client
requests, such as assigning employees to a specific identified project or
subproject or to meet a particular need that has arisen, (which employees
are typically retained until its completion), substituting for permanent
employees during vacation and sick leave, staffing high turnover
positions, filling in during the full-time hiring process or during a
hiring freeze and staffing seasonal peaks, special projects, conversions,
inventories and offices that are downsizing. Volt also provides management
personnel to coordinate special projects, thus relieving a customer of the
need to supervise temporary employees.
Volt Services Group provides the services of employees with a wide variety
of skills, ranging from technical, engineering, computer and other
professional and scientific classifications to clerks, typists, office
automation personnel, secretaries, receptionists, sales promotion
personnel, bank personnel, customer service representatives,
telemarketers, data entry clerks, inventory clerks, assemblers,
warehousing personnel and other clerical and administrative personnel.
Volt Accounting Specialists provides specialized temporary personnel in
accounting, bookkeeping and other financial classifications.
Volt Services Group maintains computerized nationwide resume databases
consisting of approximately 300,000 engineers, computer professionals and
other technical, professional and scientific candidates, from which it
fills customer job requirements for this level of employees. These
individuals are frequently willing to relocate to fulfill these
assignments. Lesser skilled employees are generally recruited and assigned
locally, and these resumes are maintained in data bases at branch offices.
Employees hired by this segment become Volt employees during the period of
their assignment (which typically ranges from as little as one day to
several years). As the employer of record, Volt is responsible for the
payment of salaries, payroll taxes, workers' compensation and unemployment
insurance and other benefits, which may include paid sick days, holiday
and vacation pay and medical insurance.
Shaw & Shaw
Shaw & Shaw, Inc. specializes in professional employer services (formerly
known as employee leasing). Shaw & Shaw shares the employer
responsibilities with its client companies, typically serving as the
administrative employer of record for either the entire full-time
workforce or for a specific department or division of the client company.
Services provided by Shaw & Shaw include
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complete human resource management, legal and regulatory compliance,
comprehensive health benefits, retirement plans and administration,
workers' compensation insurance, loss control and risk management and
payroll and payroll tax administration. Shaw & Shaw, utilizing the
purchasing power of the Company, is able to provide cost savings in health
care, workers' compensation insurance, and labor administration to its
customers, as well as relieving them of much of the paperwork
responsibility involved with maintaining employees.
Shaw & Shaw provides services on a long-term basis to large and small
client companies, in a broad spectrum of industries, including domestic
and international airlines, retail, convenience markets, country clubs,
restaurants, building contractors, petroleum, manufacturing, grocery,
medical, maintenance, janitorial, banking, aerospace, and computer.
This segment also provides a limited number of direct full-time employees to
existing customers, the majority of whom have previously been assigned on a
temporary basis and whom the clients desire to hire as direct full-time
employees.
During the week ended November 3, 1995, this segment provided approximately
22,600 employees to its customers.
The segment is not dependent upon a single customer or a few customers, the loss
of which might have a materially adverse effect upon its business. However, some
of this segment's national contracts are large, and the loss of any large
contract could have a negative effect on this segment's business until the
business could be replaced. The segment anticipates that a contract with one
customer, which accounted for approximately 7% of revenues for fiscal 1995, will
expire because the customer no longer has a need for those employees. Although
in recent years Volt has won more contracts than it has lost and/or has
succeeded in replacing expired contracts with other contracts, and although the
segment expects to replace the revenues from such contract with additional
business from existing and new customers and has obtained several national
contracts expected to begin during the first half of fiscal 1996, there can be
no assurance that it will continue to be able to do so and, even if it does,
there can be no assurance that revenues from an expired contract will be
immediately replaced. While the markets for the segment's services include a
broad range of industries throughout the United States, general economic
difficulties in specific geographic areas or industrial sectors have in the
past, and could in the future, affect the profitability of this segment.
Downward pressures on this segment's operating margins are anticipated for
fiscal 1996 due to higher employee insurance costs and increases in overhead to
open new offices and replace the business of the customer mentioned above.
The segment competes with many technical service, temporary personnel and other
contingent staffing firms, some of which are larger than Volt, as well as with
individuals seeking direct employment. However, Shaw & Shaw does not now face a
high level of competition from other national services; at present, the
competition is composed primarily of small, local companies that generally have
lower overhead.
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The ability of Volt to compete successfully for customers depends on its
reputation, pricing and quality of services provided and its ability to engage,
in a timely manner, personnel meeting customer requirements. Many of the
contracts entered into by this segment are of relatively short duration and
competition is intense. Many of the contracts under which the segment operates
are awarded on the basis of competitive proposals which are periodically rebid
by the customer. Although Volt has been successful in obtaining various short
and long-term contracts in the past, margins under such contracts have decreased
in many instances. Certain contracts have expired and there can be no assurance
that contracts will be renewed on satisfactory terms or that additional or
replacement contracts will be awarded to the Company.
Electronic Publication and Typesetting Systems
Volt, through its subsidiary, Autologic, Incorporated and certain other Volt
subsidiaries (collectively "Autologic"), designs, develops, manufactures,
assembles, integrates, markets, sells, installs and maintains computerized
imagesetting (computer-based electronic optical systems) and publication systems
equipment and software that automate the various prepress production steps in
the publishing process. Autologic's products are primarily marketed and sold to
the newspaper publishing and commercial printing industries and to companies and
other organizations having internal publishing facilities.
On October 5, 1995, an Agreement and Plan of Merger was signed which provides
for the merger of the business of this segment with that of Information
International, Inc. (Triple I), a publicly traded company. Under the terms of
the Agreement, the entire business of this segment is to be acquired by
Autologic Information International, Inc. (AIII) a new, wholly-owned Delaware
subsidiary of the Company, incorporated for this purpose. Triple I is then to be
merged into AIII on the basis of one share of Triple I common stock being
converted into one share of AIII. Following the merger and depending on the
occurrence of certain contingencies, Volt will own approximately 59% of the
outstanding shares of AIII and the former shareholders of Triple I will own
approximately 41% of the shares of AIII. The shares of AIII will be listed on
the NASDAQ National Market. A registration statement on Form S-4 has been filed
by AIII with the United States Securities and Exchange Commission (File No.
33-99278) which describes the transaction in detail. The closing is expected to
take place prior to the end of January, 1996.
Autologic's systems consist of computers and computer-controlled products used
for output of text and graphic files to raster image processors, laser imagers
and platemakers and telecommunications systems and interface products. These are
marketed as individual products or are integrated into systems in a variety of
hardware and software configurations which allow them to be structured to meet
the specific customer system requirements. Autologic has traditionally focused
on high-volume and deadline-driven customers and, while striving to retain its
leadership role in these areas, is attempting to utilize its core capabilities
to expand into the lower-volume, less time-sensitive commercial publishing and
electronic document transmission markets.
Autologic's family of products is based on a concept of total product line
integration. The system architecture provides a modular and flexible networked
design based on industry standard platforms. This approach supports upgrading as
products evolve, new products are developed and technologies change.
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To ensure customer service for its products on a worldwide basis, Autologic
maintains, either itself or through its distribution network, offices worldwide
with trained technicians and spare parts inventories. The service and support
network provides remote diagnostics and on-line assistance using
state-of-the-art telecommunication links, as well as on-site repair
capabilities. Autologic believes its products have a good reputation for high
performance, image quality, and reliability in high volume production
environments.
The Company's principal product and service lines, which are integrated into
Autologic systems to meet specific customer requirements, or are sold
individually, are:
Graphics Servers and Controllers - Graphic server and controllers are
computer-based systems which receive and store scanned graphics and
pictures, merge them with text files and page layout instructions, and
direct the output of completed pages to raster image processors and laser
output recorders. They also monitor the status of work in progress and
availability of output devices.
Laser Imaging Systems - Laser imaging systems consist of raster image
processors ("RIPs"), which are computer-based systems that interpret page
description instructions and create bit arrays, and output recorders,
which use computer controlled lasers to image bit arrays received from
RIPs onto film or printing press plate material. Autologic offers a family
of high performance RIPs based on Harlequin Ltd.'s implementation of the
Postscript page description language (PostScript is a registered trademark
of Adobe Systems, Incorporated for a programming language, which has
become a publishing industry standard).
Telecommunications Systems - Precision laser scanners, graphic servers and
laser imaging systems are linked together by computer-controlled devices
to permit the management, transmission, receipt and remote production of
graphic arts-quality ads, photographs, and complete pages via satellite,
integrated services digital networks, microwaves, or high-speed telephone
services throughout the world. These systems are designed to meet customer
needs created by the decentralization of the publishing industry, with
many new printing facilities built at a distance from the editorial
center. These telecommunications systems also enable creators at remote
sites to send text and graphics electronically to central printing sites
for editing and printing.
Interface Products - Autologic has developed a system architecture which
allows RIPs to interface to multiple types of imaging devices. Autologic's
hardware and software interfaces permit Autologic products to interface
with other Autologic products, as well as with prepress products provided
by others.
The design and manufacture of Autologic-built subassemblies and all system
assembly is performed in Autologic's facilities in Thousand Oaks, California.
This segment purchases certain completed subassemblies and manufactures others.
Most of the parts and subassemblies used in the production of this segment's
products are purchased from numerous suppliers and are integrated into Autologic
products.
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Autologic maintains a worldwide technical support and service organization,
which supports and services the full range of Autologic products, which is
headquartered in Thousand Oaks, California, with regional offices located
throughout the United States, in London, England, and in Sydney, Australia.
Autologic operates in Australia, New Zealand, the United Kingdom, Germany,
France, Spain, Sweden, Israel, Canada, the Caribbean and Mexico. Local
distributors and agents sell and service Autologic products in the remainder of
the worldwide markets. Autologic has recently expanded its network of
distributors and agents with a view to increasing sales worldwide, especially in
areas of emerging economic growth.
Autologic's position in its markets depends largely upon its reputation, the
quality, design and pricing of its products, the timeliness of its deliveries,
and its field service. The markets in which the segment competes are marked by
rapidly changing technology and, although Volt continues its investment in
research and development, there is no assurance that this segment's present or
future products will be competitive, that the segment will continue to develop
new products or that present products or new products can be successfully
marketed.
The market for this segment's products is highly competitive. Technological
advancements, "open system" architecture and general market conditions have
created a market where price competition is commonplace. The product mix has
changed as Autologic has expanded into commercial publishing and document
transmission markets, with an increase in low-margin products in direct
competition with products of many other manufacturers, and a decrease in sales
of some high margin products. A number of firms, some of which are substantially
larger and have substantially greater financial resources than Volt,
manufactures one or more products competing with one or more of the segment's
products. Some of these competitors sell their products as complete systems, for
some of which Autologic has no competing system.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that these patents or trademarks are material to
the segment.
Sales made outside the United States to unaffiliated foreign customers of
products manufactured or assembled in the United States amounted to $36,200,000
in fiscal 1995, $31,200,000 in fiscal 1994 and $26,000,000 in fiscal 1993. In
the past, Autologic has been adversely affected by general economic recessions
in the United States and in other countries where Autologic products are sold.
In addition, a significant portion of Autologic's business is in the newspaper
publishing industry, which has in the past, experienced significant revenue
downturns during recessions. These downturns resulted in reductions in capital
expenditures by that industry, adversely affecting Autologic's performance.
Telephone Directory
Volt's Telephone Directory segment consists of the Directory Systems/Services
division, the DataNational division, the Uruguay operations and the Advanced
Technologies, Research & Development division.
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Directory Systems/Services
Volt's Directory Systems/Services division markets to directory publishers and
utilizes internally highly specialized systems, including both open and
proprietary, which it developed, as well as, third-party off-the-shelf software.
The division has integrated and maintains these systems for managing the
production and control of databases for directory and other advertising media
publishers. These systems are capable of implementing and maintaining databases,
producing digitized display advertisements and photocomposing pages using
equipment manufactured by Autologic and others, with integrated graphics for
yellow and white pages directories as well as CD ROM and Internet directories.
These systems are marketed to publishers incorporating "workflow management" by
which ads are automatically routed between workstations, increasing thru-put and
control.
The Directory Systems/Services division customized these software/hardware
systems, to meet the needs of publishers who desire to perform their work
in-house. The division also provides outsourcing services for advertising,
database management and publication to publishers who choose not to do the work
in-house. These systems are sold or licensed and the services are performed for
directory publishers and others worldwide. The Directory Systems/Services
division also provides directory management systems and various photocomposition
services to a number of regional telephone and independent directory publishers,
licenses production system software to directory publishers and provides
commercial services, such as composition, data processing and database
management services to other customers.
The Directory Systems/Services division separately markets workstations which
are used to facilitate the creation of telephone directories. These include a
graphics workstation (RAD-GRAF), containing Volt-developed software, which
facilitates incorporating special graphic effects in the presentation of ads for
merging text and graphics on a finished page. Another workstation is the
Real-time Incolumn Display (RID) workstation, an on-line electronic galley
editor which allows last minute alterations and insertions of ads and listings,
while displaying the composed results as they will appear on the finished page.
Services are rendered under various short and long-term contracts and are
performed primarily at facilities maintained by Volt in Blue Bell, Pennsylvania;
Indianapolis, Indiana; Anaheim and San Diego, California; and, in one instance,
at the customer's facility.
DataNational
Volt's DataNational division publishes community telephone directories in
Virginia, Maryland, North Carolina and Arkansas. During fiscal 1995 it added new
directories in Hampton and Newport News in Southern Virginia, and
Winchester/Front Royal in Northern Virginia. Additionally, the Company announced
the start of new directories in Charlotte, North Carolina, and Norfork,
Virginia, which will be published in fiscal 1996. This brings the total
community, county and regional directories to 59, an increase of eighteen over
the last five years.
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Uruguay Operations
This operation produces, publishes and prints the official white pages and
yellow pages directories for the government-owned telephone company in
Uruguay, and sells yellow pages advertising for the yellow pages
directory. The Uruguay operation also performs commercial printing in
Uruguay for customers in the Mercosur common market (Uruguay, Argentina
and Brazil).
Advanced Technologies, Research & Development
Volt's Advanced Technologies, Research & Development division researches
and implements new product lines and adopts new computer technology for
internal office and business processing automation.
This division, through its Volt Consulting Services branch, provides the
Company, as well as non-affiliated customers, with data processing
consulting, applications development, and software systems integration
services.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that these patents or trademarks are material to
the segment.
This segment faces intense competition with respect to all of these services and
products from other suppliers and from in-house facilities of potential
customers. Some of its significant competitors are companies which are larger
and have substantially greater financial resources than Volt. Volt's ability to
compete in its Telephone Directory segment depends upon its reputation,
technical capabilities, price, quality of service and ability to meet customer
requirements in a timely manner. Volt believes that its competitive position in
this segment's areas of operations is augmented by its ability to draw upon the
expertise and resources of its other segments.
This segment's position in its markets depends largely upon its reputation, the
quality, design and pricing of its products and the timeliness of its
deliveries. Although Volt continues its investment in research and development,
there is no assurance that this segment's present or future products will be
competitive, that the segment will continue to develop new products or that
present products or new products can be successfully marketed.
A substantial portion of Volt's business in this segment is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. While the segment has obtained various short
and long-term contracts, margins under such contracts have decreased in many
instances. Certain contracts expired in 1995 and others will expire in 1996
through 2000. While the Company is endeavoring to secure renewals and/or
extensions of these contracts, some of which are material to this segment, and
to obtain replacement business, there can be no assurance that contracts will be
renewed or extended on satisfactory terms or that additional or replacement
contracts will be awarded to the Company.
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Engineering and Construction
The Engineering and Construction segment consists of the Voltelcon and Advanced
Technology Services divisions.
Voltelcon
Volt's Voltelcon division furnishes a wide range of telecommunications
services, including engineering, construction, maintenance, installation,
removals and distribution of telecommunications products. Its customers
are telephone operating companies, interexchange carriers, alternative
local transport carriers, telecommunications equipment manufacturers,
cable television and electric power companies, government units and
private entities. It performs these services primarily in the central
office, outside plant and at end user premises.
Advanced Technology Services
Volt's Advanced Technology Services (ATS) was established in 1994 to meet
the challenges of the "Information Super Highway" and the merging of
voice, data and video services to telephony, broadband and other providers
of information system services, such as telephone companies, interexchange
carriers, government and private industry. ATS accommodates clients in the
telecommunications industry who require a full range of services from
multiple Volt business segments, such as human resources, facilities,
equipment, vehicles, systems analysis, network integration, software
development and turnkey applications.
This segment faces substantial competition with respect to all of its
telecommunications services from other suppliers and from in-house capabilities
of potential customers. This segment experienced increased sales and realized a
profit in fiscal 1995; nevertheless, competition remains intense, often
resulting in low margins. Some of this segment's significant competitors are
larger and have substantially greater financial resources than Volt. Other
competitors are small, local companies, that generally have lower overhead.
Volt's ability to compete in this segment depends upon its reputation, technical
capabilities, price, quality of service and ability to meet customer
requirements in a timely manner. Volt believes that its competitive position in
this segment is augmented by its ability to draw upon the expertise and
resources of other Volt segments.
A substantial portion of Volt's business in this segment is obtained through
submission of competitive proposals for contracts that typically expire in one
to three years and are then rebid. While the segment has obtained various short
and long-term contracts, margins under such contracts have decreased in many
instances. Certain contracts expired in 1995 and others will expire in 1996
through 1998. While the Company is endeavoring to secure renewals and/or
extensions of these contracts, some of which are material to this segment, and
to obtain replacement business, there can be no assurance that contracts will be
renewed or extended on satisfactory terms or that additional or replacement
contracts will be awarded to the Company. There can be no assurance that this
segment will continue to be profitable.
- 13 -
14
Computer Systems
The Computer Systems segment is comprised of Volt Delta Resources and Volt
Viewtech.
Volt Delta Resources
Volt Delta Resources ("Volt Delta") is engaged in the design, programming,
sale and/or lease, and maintenance of computer information systems and
services, primarily for the telecommunications and financial markets. The
segment's headquarters are located in New York, New York. Volt Delta
operates as two business units: Information Systems and Maintech.
Volt Delta's Information Systems division markets operator services
solutions to telephone companies and interexchange carriers worldwide.
Although, in the past, the division's services consisted of the
development and sale of turnkey systems to its customers, because some of
these companies have expressed an interest in upgrading the operator
services capabilities by procuring the services as an alternative to
making a capital investment in systems, Volt Delta has begun marketing
directory assistance capabilities on a services basis on an access basis.
This service is marketed as Directory Express, with Volt Delta owning and
operating its own proprietary Delta Operator Services System (DOSS) and
providing access to a national database, although there have not been any
sales in fiscal 1995. Directory Express is a transaction-based service
designed to offer Directory Assistance (DA) operators worldwide, with
access to over 120 million United States business, residential and
government listings. For consumer (end user) and especially for roaming
mobile users, Directory Express is expected to provide a more convenient
and efficient level of directory assistance service since, among other
things, consumers may obtain directory information without having to know
the correct area code.
DOSS allows telecommunication customers to interface interactively with
voice response units through the touch tone pad of their telephones and
via limited voice recognition technology. These features provide new
revenue sources to the telephone company from such applications as call
completion, customized intercept and automated directory assistance.
Although the basic DOSS system is offered to customers who wish to
purchase systems, typically each customer will require some special
features, and in some instances, extensive customization to attain service
differentiation.
During 1993 and 1994, Volt Delta entered into several contracts for the
sale of DOSS and DOSS-related services with major telecommunication
customers, one of which is based in the United Kingdom and whose DOSS
system is in its final stages of implementation. Several other DOSS
contracts for system deliveries were completed and accepted during 1994
and 1995, while other contracts are in-process. During 1995, Volt Delta
introduced its Operator and Agent Services Integration System (OASIS),
which provides operator services providers open access to multiple
information-based databases.
- 14 -
15
Volt Delta's services division, Maintech, provides installation planning,
database creation, system and network monitoring, computer operations, and
system maintenance services to DOSS and Directory Express customers. As a
complementary line of business, Maintech provides an array of services to
customers who have purchased computer systems and networks from others.
These services include project management, system and network design and
implementation, Help Desk support, workstation and PC integration, as well
as maintenance services on DEC, SUN, Silicon Graphics, IBM RS/6000 and
other advanced technology product lines.
In order to fulfill its commitments under its contracts, Volt Delta is
required to develop advanced computer software programs and purchase
substantial amounts of computer and related equipment manufactured by
unaffiliated corporations. Much of the equipment required for these
contracts is purchased as needed and is readily available from a number of
suppliers.
Volt Viewtech
Volt's Viewtech subsidiary supports energy and water conversion
initiatives through management, financial, and technical services provided
to the utility industry, major financial institutions, trade associations,
and manufacturers. Viewtech is a certified Fannie Mae lender and a
national service provider for automatic meter reading firms. Viewtech
manages the nations largest residential water conservation rebate program
in New York City and provides similar conservation services to utilities
nationwide. Viewtech develops proprietary software and systems which it
licenses and uses to support its business operations. Viewtech is
headquartered in Anaheim, California, and operates through three regional
offices, located in Little Rock, Arkansas; San Francisco, California and
Atlanta, Georgia, with project offices located throughout the country.
Although Volt continues its investment in research and development, there is no
assurance that this segment's present or future products will be competitive,
that the segment will continue to develop new products or that present products
or new products can be successfully marketed. The inability to sell additional
major systems would have an adverse effect on this segment's business.
The Company holds several patents and trademarks related to this segment's
products, but does not believe that these patents or trademarks are material to
the segment.
The business environment in which this segment operates is highly competitive.
Some of this segment's principal competitors are considerably larger than Volt
and have substantially greater financial resources. This segment's position in
its market depends largely upon its reputation, quality of services and ability
to develop, maintain and implement information systems on a cost competitive
basis.
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. Since sales of systems under DOSS contracts are generally recorded
upon customer acceptance, acceptance in a particular year may affect the
comparability of results with other years. Although sales of systems are
normally not recurring, a larger installed base provides opportunities for
future expansion of existing customer systems, system enhancement sales and
maintenance revenue.
- 15 -
16
Joint Ventures
A subsidiary of the Company is a shareholder in Pacific Access Pty. Ltd.
("Pacific Access"), a joint venture company in Australia. This venture, which
commenced operations in July 1991, assumed responsibility throughout Australia
for the marketing, selling and compilation functions of all yellow pages
directories of Telstra Corporation Ltd., the Australian Government-owned
telephone company, under the terms of a twelve-year contract. Telstra
Corporation Ltd. owns fifty percent of the voting common stock of Pacific
Access, while subsidiaries of Volt, Southwestern Bell, Bell Canada and Edward H.
O'Brien Industries each hold twelve and one-half percent.
In July 1994, the Company acquired an interest, consisting of 50% of the common
shares and 75% of the redeemable preferred shares and debt, in Telelistas
Editora Ltda., a Brazilian company which has a long-term contract to publish the
official White Pages, Yellow Pages and Street Guides for the City of Rio de
Janeiro on behalf of TELERJ, the government-owned telephone company.
For further information concerning the Company's operations and joint ventures,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Research and Development
During fiscal years 1995, 1994, and 1993, the Company expended approximately
$6,989,000, $6,262,000, and $5,830,000, respectively, on research and
development, all of which is Company sponsored. The major portion of research
and development expenditures were incurred in the Electronic Publication and
Typesetting Systems segment, the Telephone Directory segment and the Computer
Systems segment.
Customers
No customer represented more than 10% of the Company's consolidated revenues for
the year ended November 3, 1995. For the 1995 fiscal year, the Telephone
Directory segment's sales to one customer represented approximately 24% of the
total sales of that segment; the Engineering and Construction segment's sales to
two customers represented approximately 31% and 20% of the total sales of that
segment; and the Computer Systems segment's sales to three customers represented
approximately 30%, 17% and 12% of the total sales of that segment. Each of these
segments is dependent on such respective customers. In the event that there were
a loss of one or more of these customers by the respective segment, unless the
business is replaced by that segment, there could be an adverse effect on that
segment's business, although the Company does not believe that there would be an
adverse effect on the business of the Company taken as a whole.
Seasonality
Historically, the Company's results of operations have been lower in the first
fiscal quarter as a result of reduced requirements for its technical and
temporary personnel due to the holiday season. In addition, Pacific Access (see
"Joint Ventures" above) produces a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters. The Uruguayan telephone directory operation produces a major portion
of its revenues and most of its profits in the Company's fourth fiscal quarter,
and DataNational is adversely affected in the Company's first fiscal quarter due
to the seasonality of its directory closing schedule.
- 16 -
17
Employees
During the week ended November 3, 1995, Volt employed approximately 26,800
persons, including approximately 22,600 persons who were on temporary assignment
for the Technical Services and Temporary Personnel segment.
Volt is a party to two collective bargaining agreements which cover a small
number of employees. Volt believes that it has satisfactory relations with its
employees.
Certain of the services rendered by Volt's Electronic Publication and
Typesetting Systems, Telephone Directory and Computer Systems segments require
highly trained technical personnel in specialized fields which are currently in
short supply and, while the Company currently has a sufficient number of such
technical personnel in its employ, there can be no assurance that in the future
these segments can continue to employ sufficient technical personnel necessary
for the successful conduct of such services.
Regulation
The Company's business is not subject to specific industry government
regulations. In connection with foreign sales, it is subject to the Foreign
Corrupt Practices Act and export controls. The export of certain technologies
are restricted. At the present time, and with respect to the countries in which
the Company's Electronic Publication and Typesetting Systems, Telephone
Directory and Computer Systems segments currently sell most of their products,
the sale of their current products, both hardware and software, are permitted
pursuant to a general export license. An expansion of sales to countries
designated by the United States as sensitive would be subject to more
restrictive export regulations.
See also Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
- 17 -
18
ITEM 2. PROPERTIES
The Company occupies 41,000 square feet at 1221 Avenue of the Americas, New
York, New York, under a lease which expires in 2000. The facility is shared by
its corporate headquarters, its Computer Systems' segment headquarters and a
regional headquarters of its Technical Services and Temporary Personnel segment.
The following table sets forth certain information as to each of the Company's
other major facilities:
Sq. Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- -------- -------------
Anaheim, Telephone Directory 39,000 * owned
California
El Segundo, Technical Services and 20,000 owned
California Temporary Personnel
Telephone Directory
Thousand Oaks, Electronic Publication and 134,000 owned
California Typesetting Systems
Orange, West Region Headquarters 200,000 * owned
California Accounting Center
Technical Services and
Temporary Personnel
Telephone Directory
Computer Systems
San Diego, Technical Services and 20,000 owned
California Temporary Personnel
Norcross, Electronic Publication and 13,000 1998
Georgia Typesetting Systems
Technical Services and
Temporary Personnel
Engineering and Construction
Indianapolis, Telephone Directory 22,000 1998
Indiana
- 18 -
19
ITEM 2. PROPERTIES - Continued
Sq.Ft.
Leased If Leased,
or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ------ -------------
Pleasanton, Computer Services 35,000 1996
California
Wallington, Computer Services 32,000 1997
New Jersey
Blue Bell, Telephone Directory 52,000 1996
Pennsylvania Technical Services and
Temporary Personnel
Montevideo, Telephone Directory 27,000 1997
Uruguay
Chantilly, Telephone Directory 18,000 2000
Virginia Computer Systems
Technical Services and
Temporary Personnel
Redmond, Technical Services and
Washington Temporary Personnel 21,000 1998
* See Note G of Notes to Consolidated Financial Statements for information
regarding a term loan secured by these properties.
In addition, the Company leases space in approximately 170 other facilities
throughout the United States and Europe (excluding month-to-month rentals), each
of which consists of less than 10,000 square feet. These leases expire at
various times from 1996 until 2000 (with one, in the United Kingdom, expiring in
2010).
At times, the Company leases space to others in the buildings which it owns if
it does not then require the space for its own business.
The Company believes that its facilities are adequate for its presently
anticipated requirements and that it is not dependent upon any individually
leased premises.
For additional information pertaining to properties, see Note I of Notes to
Consolidated Financial Statements.
- 19 -
20
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers
WILLIAM SHAW, 71, a founder of the Company, has been President and Chairman of
the Board of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years. He is the brother of Jerome Shaw.
JEROME SHAW, 69, a founder of the Company, has been Executive Vice President and
Secretary of the Company for more than the past five years and has been employed
in executive capacities by the Company and its predecessors for over forty
years. He is the brother of William Shaw.
IRWIN B. ROBINS, 61, has been a Senior Vice President of the Company since
September 1985. For more than five years prior thereto, he served as Vice
President and General Counsel of the Company.
JAMES J. GROBERG, 67, has been a Senior Vice President of the Company since
September 1985. Mr. Groberg also served as Treasurer of the Company from
September 1985 to January 1994 and Executive Vice President and Treasurer of the
Company from July 1973 until April 1981.
HOWARD B. WEINREICH, 53, has been General Counsel of the Company since September
1985 and served as Associate General Counsel of the Company from September 1981
until he assumed his present position.
JACK EGAN, 46, has been Vice President - Corporate Accounting and Principal
Accounting Officer since January 1992. For more than five years prior thereto,
he served as Assistant Controller of the Company.
DANIEL G. HALLIHAN, 47, has been Vice President - Accounting Operations since
January 1992. For more than five years prior thereto, he served as Director of
Corporate Financial Planning & Control.
LUDWIG M. GUARINO, 44, has been Treasurer of the Company since January 1994. For
more than five years prior thereto, he served as Assistant Treasurer of the
Company.
- 20 -
21
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ National Market (NASDAQ Symbol-Volt). The following table
sets forth the high and low prices of Volt's Common Stock as reported by NASDAQ,
and reflects interdealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions:
1995 1994
------------------------ -----------------------
Fiscal Period High Low High Low
- ------------- ---- --- ---- ---
First Quarter $14-3/4 $12-7/8 $ 9-1/2 $7-3/4
Second Quarter 16-5/8 13-5/8 8-3/4 7-3/4
Third Quarter 16 14-1/8 9-1/8 8-1/8
Fourth Quarter 24-3/4 14-5/8 13-3/8 8-3/8
Restated to reflect a two-for-one stock split effected on October 6, 1995.
The approximate number of record holders of the Company's common stock at
January 16, 1996 was 414.
Cash dividends have not been paid during the two-year period ended November 3,
1995. The Company has agreements, which contain financial covenants, the most
restrictive of which requires the Company to maintain a tangible net worth of
$84,000,000. At November 3, 1995, this condition was met and the amount
available for dividends was $17,265,000 (see Note G of Notes to Consolidated
Financial Statements).
- 21 -
22
ITEM 6. SELECTED FINANCIAL DATA
Year Ended (Note 1)
------------------------------------------------------------------------
November October October October November
3, 1995 28, 1994 29, 1993 30, 1992 1, 1991
----------- ----------- ----------- ---------- ----------
(Dollars in thousands, except per share data)
Revenues $ 907,362 $ 734,486 $ 565,173 $ 530,567 $ 483,632
=========== =========== =========== ========== ==========
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of a change in accounting $ 16,386* $ 12,044* $ (3,674)* $ 1,091* $ 345*
Extraordinary items-gains (losses) on the
repurchases of debt, net of income taxes--Note 2 (62) (271) 579
Cumulative effect of a change in accounting
for income taxes--Note 3 959
----------- ----------- ----------- ---------- ----------
Net income (loss) $ 16,324 $ 11,773 $ (2,715) $ 1,091 $ 924
=========== =========== =========== ========== ==========
Per Share Data
Income (loss) from continuing operations
before extraordinary items and cumulative
effect of a change in accounting $ 1.70* $ 1.26* $ (.38)* $ .11* $ .04*
Extraordinary items (.01) $ (.03) .06
Cumulative effect of a change in accounting
for income taxes .10
----------- ----------- ----------- ---------- ----------
Net income (loss) $ 1.69 $ 1.23 $ (.28) $ .11 $ .10
=========== =========== =========== ========== ==========
Number of shares used in computation--Note 4 9,634,334 9,605,492 9,597,726 9,580,762 9,696,636
Total assets $ 264,011 $ 226,904 $ 235,892 $ 226,502 $ 214,590
Long-term debt, net of current portion $ 28,819 $ 40,788 $ 58,095 $ 81,076 $ 86,103
Note 1--Fiscal 1995 was comprised of 53 weeks, while fiscal years 1991-1994 were
each comprised of 52 weeks.
Note 2--See Note G of Notes to Consolidated Financial Statements for fiscal
years 1995 and 1994. The extraordinary items in fiscal year 1991 result from
repurchases at a discount of $3,570,000, respectively, face value of the
Company's 12-3/8% Subordinated Debentures.
Note 3--See Note F of Notes to Consolidated Financial Statements.
Note 4--See Note A of Notes to Consolidated Financial Statements for the basis
of determining the number of shares used in the computation.
Note 5--Cash dividends have not been paid during the five-year period ended
November 3, 1995.
* The results from continuing operations include the following gains and
(losses) on the sale or write-down of marketable securities: 1994 - ($7,000);
1993 - $199,000 or $.02 per share; 1992 - $541,000 or $.06 per share and 1991
- ($910,000) or ($.09) per share.
The results of operations for fiscal 1993 includes a pretax charge of
$6,400,000 or ($.44 per share) for estimated costs in excess of anticipated
revenues under two contracts for major directory assistance systems. In
fiscal 1994 and 1995, the Company received customer acceptance under such
contracts, which, because of the pretax charge in 1993 related to such
contracts, had no effect on Company's earnings for 1994 and 1995, although
revenues (and costs) of $59 million and $15 million were recognized in 1994
and 1995, respectively.
The results of fiscal 1992 include a reversal of a portion of prior years'
business tax expenses of $1,070,000 ($.08 per share) and a charge of $722,000
($.05 per share) relating to a portion of a facility under lease until fiscal
1994 which is no longer being utilized.
The results of fiscal 1991 include a gain of $6,658,000 ($4,053,000, net of
taxes, or $.42 per share), net of legal expenses, due to the settlement of
litigation and a $288,000 gain ($.02 per share) applicable to the repurchase,
at a discount, of $2,330,000 face value of the Company's 12-3/8% Subordinated
Debentures used to satisfy the 1992 sinking fund requirement. In July 1991,
the Internal Revenue Service concluded its examination of the Company's tax
returns for the fiscal years 1980 through 1988. Accordingly, $1,473,000 ($.15
per share), included in the liability for income taxes at November 2, 1990
applicable to such years in excess of the amount payable as a result of the
examination, has been included as a tax benefit in fiscal 1991.
- 22 -
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information which appears below relates to prior periods, the results of
operations for which periods are not necessarily indicative of the results which
may be expected for any subsequent periods. Management has made no predictions
or estimates as to future operations and no inferences as to future operations
should be drawn. The following discussion should be read in conjunction with the
Industry Segment Data in Item 1 of this Report and the Consolidated Financial
Statements and Notes thereto which appear in Item 8 of this Report.
Results of Operations - Summary
Revenue in fiscal 1995 increased by $172,876,000, or 24%, from fiscal 1994, as
sales increased by $186,436,000, or 26%. Revenue in fiscal 1994 increased by
$169,313,000, or 30%, from fiscal 1993, as sales increased by $162,763,000, or
29% and the Company realized a $9,770,000 gain on the sale of a joint venture.
The increase in sales in 1995 and 1994 include increases in the Computer Systems
segment of $32,825,000 and $61,554,000, respectively, due to the completion of
several long-term contracts and increases in the Technical Services and
Temporary Personnel segment of $137,836,000 and $92,905,000, respectively.
In fiscal 1995, the Company had income of $27,281,000 before income taxes and
extraordinary items, compared to $19,827,000 in fiscal 1994 and a loss of
$5,594,000 before income taxes and a cumulative effect of a change in accounting
in fiscal 1993. The 1994 results include a $9,770,000 pretax gain on the sale of
a joint venture. The 1993 results included a $6,400,000 pretax charge for
non-recoverable costs under two large contracts. The principal increases in
operating profit in 1995 were from Technical Services and Temporary Personnel
segment, with an increase of $11,780,000, and the Computer Systems segment, with
an increase of $8,563,000. The principal increases in the operating profit in
1994 were from Technical Services and Temporary Personnel, with an increase of
$8,977,000, and Computer Systems, where losses were reduced by $6,381,000.
The extraordinary items in fiscal 1995 and 1994 were losses of $62,000 and
$271,000, respectively, due to the early redemption at par of $10,000,000 and
$30,000,000 face value of the Company's 12-3/8% Subordinated Debentures.
The cumulative effect of a change in accounting of $959,000 in fiscal 1993 was
due to the Company adopting Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes".
The net income in fiscal 1995 and 1994 was $16,324,000 and $11,773,000,
respectively, compared to a net loss in fiscal 1993 of $2,715,000.
The 1995 fiscal year includes 53 weeks, compared to 52 weeks in fiscal 1994 and
1993.
Results of Operations - Segments
The Company's consolidated operating profit was $42,493,000 in fiscal 1995,
compared to $22,982,000 in fiscal 1994 and $7,566,000 in fiscal 1993. (See
Industry Segment Data in Item 1 of this Report and Note J of Notes to
Consolidated Financial Statements in Item 8 of this Report).
The Technical Services and Temporary Personnel segment's sales increased by
$137,836,000, or 32%, in fiscal 1995 to $572,346,000 and by $92,905,000, or 27%,
in fiscal 1994, to $434,510,000. Operating profit of the segment increased by
$11,780,000, or 72%, to $28,117,000 in fiscal 1995 and
- 23 -
24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
by $8,977,000, or 122%, to $16,337,000 in fiscal 1994. In fiscal 1995 and 1994,
approximately $56,000,000 and $60,000,000, respectively, of the segment's sales
increase was the result of business with new customers, with pre-existing
customers accounting for the balance. One new customer accounted for
approximately $38,000,000 of the increase in sales in fiscal 1995. It is
anticipated that the segment's services to that customer will no longer be
required subsequent to January 31, 1996. The operating profit increases in
fiscal 1995 and 1994 were due to the increased sales volume and increases in
gross margin (.9 percentage points in 1995) resulting from lower workers'
compensation insurance and other costs partially offset by increases in overhead
to support the additional sales. Downward pressures on operating margins are
anticipated for fiscal 1996 due to higher employee insurance costs and increases
in overhead to open new offices and replace the business of the customer
mentioned above. Although the markets for the segment's services include a broad
range of industries throughout the United States, general economic difficulties
in specific geographic areas or industrial sectors have in the past, and could
in the future, affect the profitability of this segment.
The Electronic Publication and Typesetting Systems segment's sales increased by
$5,082,000, or 8%, to $70,405,000 in fiscal 1995 and increased by $5,983,000, or
10%, to $65,323,000 in fiscal 1994. The sales increases were primarily due to
increased equipment sales in overseas markets (1995) and domestic and overseas
markets (1994). Despite the increase in sales, operating profits decreased by
$878,000, or 66%, in fiscal 1995 to $456,000 and by $706,000, or 35%, in fiscal
1994 to $1,334,000 primarily due to a reduction in the gross margin of 2.3 and 4
percentage points in 1995 and 1994, respectively, partially offset by a 1.2 and
3 percentage point decrease in total operating expenses expended per sales
dollar in 1995 and 1994, respectively. The decrease in the gross margin
percentage resulted from a change in the product mix (a decrease in sales of
some high-margin products and an increase in sales of some low-margin items
which are in direct competition with other manufacturers' products). The markets
in which the segment competes are marked by rapidly changing technology, with
sales in fiscal years 1995, 1994 and 1993 of equipment introduced within the
last three years comprising approximately 84%, 84% and 65%, respectively, of
equipment sales. See Note P of Notes to Consolidated Financial Statements for
information concerning a pending acquisition.
The Telephone Directory segment's sales decreased by $4,388,000, or 6%, to
$69,767,000 in fiscal 1995 and decreased by $4,789,000, or 6%, to $74,155,000 in
fiscal 1994. In fiscal 1995, the segment's operating profit decreased by
$5,189,000, or 78%, to $1,506,000. In fiscal 1994, the segment's operating
profit decreased by $1,458,000, or 18%, to $6,695,000. The fiscal 1995 sales
decline is due to a decrease in telephone directory production volume, primarily
related to the expiration of a contract in early 1995, which generated sales of
$9,000,000 in fiscal 1994, partially offset by increases in independent
directory sales by the segment's DataNational division and increased volume in
the Uruguayan printing operation of 16% and 15%, respectively. The fiscal 1995
decline in operating profit was due to the lower telephone directory production
sales volume, an increase in costs to develop new directory management systems
and start-up losses incurred in the automated production of newspaper display
advertisements. The 1994 sales decline is primarily due to the absence in 1994
of revenue from the sale of automated directory systems which occurred in 1993,
partially offset by increased independent directory sales by the segment's
DataNational division and a 4% increase in telephone directory production. The
operating profit decline in 1994 was due to the absence in 1994 of high margin
automated directory system shipments made in 1993. This segment's services are
rendered under various short and long-term contracts which expired in fiscal
1996 through 2000. There can be no assurance that they will be renewed or
replaced on similar terms.
- 24 -
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
The Engineering and Construction segment's sales increased by $15,314,000, or
29%, to $67,990,000 in fiscal 1995 and by $5,203,000, or 11%, to $52,676,000 in
fiscal 1994. In fiscal 1995 and 1994, the segment had a profit of $6,178,000 and
$792,000, respectively, compared to a loss of $1,128,000 in 1993. The fiscal
1995 sales increase was due to a 37% increase in the construction division and
an 8% increase in the business systems division. Operating results improved due
to the increased sales volume, an increase in the gross margin of 1.3 percentage
points and a 6.8 percentage point decrease in overhead expended per sales
dollar. The 1994 sales increase was due to increases in the Advanced Technology
Services division and installation services partially offset by a decline in
engineering revenue. Operating results improved in fiscal 1994, due to increased
sales volume and improved gross margins.
The Computer Systems segment's sales increased by $32,825,000, or 33%, to
$131,960,000 in fiscal 1995 and increased by $61,554,000, or 164%, to
$99,135,000 in fiscal 1994. The segment had an operating profit in fiscal 1995
of $6,395,000, as compared to an operating loss of $2,168,000 and $8,549,000 in
fiscal 1994 and 1993, respectively. The 1995 and 1994 sales included revenues of
$85,000,000 and $64,500,000, respectively, recognized on customer acceptance of
several major Delta Operator Service Systems (DOSS). The fiscal 1995 increase in
sales and operating profit was primarily due to customer acceptance of six DOSS
contracts, increased maintenance revenues and increased sales and profits on
conservation services to utilities. The fiscal 1994 sales increase was primarily
due to customer acceptance and revenue recognition of two DOSS contracts.
Operating profit improved in 1994, primarily due to the absence in 1994 of a
$6,400,000 charge taken in 1993 for costs not recoverable on two contracts, one
completed in fiscal 1994 and the other in fiscal 1995. 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. Since
sales of systems under DOSS contracts are generally recorded upon customer
acceptance, acceptance in a particular year may affect the comparability of
results with other years. Although sales of systems are normally not recurring,
a larger installed base provides opportunities for future expansion of existing
customer systems, system enhancement sales and maintenance revenue.
Results of Operations - Other
Interest income increased by $673,000, or 50%, in fiscal 1995 and decreased by
$45,000, or 3%, in fiscal 1994. The fiscal 1995 increase was primarily due to
higher prevailing rates and additional funds available for investment in
interest-bearing securities (see "Liquidity and Capital Resources", below). The
decrease in fiscal 1994 was primarily due to reduced funds available for
investments in interest-bearing securities.
The Company's equity in the net loss of its joint ventures was $1,000,000 in
1995, compared to net income of $3,055,000 and $4,940,000 in 1994 and 1993,
respectively. In February 1994, the Company sold for $16,400,000 its 50%
interest in Pacific Volt Information Systems, a joint venture, which composed
telephone directories in California under a contract that was due to expire in
1996.
- 25 -
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
The sale resulted in a pretax gain of $9,770,000. The fiscal 1995 decrease was
due to the start-up losses incurred by the Company's Brazilian joint venture
which began operations in July 1994 and the absence of profits from the U.S.
joint venture sold in February 1994. The 1994 results for the twelve months
included only four months of income attributable to the U.S. joint venture, or
$661,000, compared to $2,327,000 in 1993. The Company's share of the income of
the Australian joint ventures increased in 1995 by 12%, and decreased in 1994 by
1%. The Company's fiscal 1995 share of the income of its Australian joint
ventures, 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
$260,000 due to increased revenues. The 1994 decline was primarily due to an
arrangement which ended in 1993 in which the Company's share of the joint
venture's income was able to exceed its 12-1/2% ownership.
Selling and administrative expenses increased by $2,581,000, or 6%, to
$45,657,000 in 1995 and by $2,967,000, or 7%, to $43,075,000 in 1994 to support
the increased sales activities. These expenses expressed as a percentage of
sales were 5.0%, 6.0% and 7.2% for fiscal years 1995, 1994 and 1993,
respectively.
Research and development expenses increased by $727,000, or 12%, to $6,989,000
in 1995 and $432,000, or 7%, to $6,262,000 in 1994. The increase in 1995 was due
to additional product development by the Telephone Directory and Computer
Systems segments, partially offset by a decrease in the Electronic Publishing
and Typesetting Systems segment. The 1994 increase was due to an increase in the
Computer Systems segment, partially offset by decreases in the Telephone
Directory and Electronic Publication and Typesetting Systems segments. The
decreases in the Electronic Publication and Typesetting Systems segment in 1995
and 1994 were due primarily to a reduction in certain development projects.
Depreciation and amortization increased by $1,214,000, or 11%, to $11,959,000 in
1995 and increased by $554,000, or 5%, to $10,745,000 in 1994. The fiscal 1995
and 1994 increases are due to increased fixed asset expenditures in 1993, 1994,
and 1995.
The foreign exchange gain in fiscal year 1995 was $186,000, compared to losses
of $39,000 and $378,000 in fiscal 1994 and 1993, respectively. The foreign
exchange gain in 1995 was due to favorable currency movements in certain
currencies and the reduced loss in 1994 resulted from a stabilized European
currency market. To minimize the potential adverse impact on the Company's
foreign currency receivables and sales when the dollar strengthens against
foreign currencies, foreign currency options are purchased.
Interest expense decreased by $1,423,000, or 19%, to $6,045,000 in 1995 and by
$3,610,000, or 33%, to $7,468,000 in 1994. The decreases in 1995 and 1994 were
due to reductions in the interest rate on a mortgage loan and to the repurchase
of a portion of the Company's 12-3/8% Subordinated Debentures. The Company has
established additional financing at lower costs through the sale of accounts
receivable which enabled the Company to call and redeem $20,000,000 of
debentures in November 1993 and $10,000,000 in May 1995, and as a result of the
sale of a 50% joint venture, redeemed $10,000,000 in May 1994. In fiscal 1995,
1994 and 1993, other income was reduced by charges of $2,133,000, $1,557,000 and
$849,000, respectively, for costs incurred in conjunction with the sale of
accounts receivable (see Note C of Notes to Consolidated Financial Statements).
- 26 -
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--Continued
See Note F of Notes to Consolidated Financial Statements for information
concerning the Company's effective tax rates for fiscal 1993 through fiscal
1995.
The cumulative effect of a change in accounting for income taxes of $959,000
relates to the adoption by the Company of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", in the first quarter of 1993.
Due to the uncertainty as to their future utilization, tax benefits have not
been recognized for certain loss and credit carryforwards, by establishing a
valuation allowance which will be periodically evaluated.
Liquidity and Capital Resources
Cash and cash equivalents increased by $8,301,000 in 1995 to $25,350,000.
Cash flows from operating activities contributed $34,115,000 to cash flows. Many
factors, reflected in the accompanying Consolidated Statements of Cash Flows,
affected the amount of cash flows from operating activities. Primary among the
factors providing cash flows to operating activities in 1995 were the Company's
net income of $16,324,000, a non-cash expense of $11,959,000 for depreciation
and amortization, and increases in accrued expenses of $10,596,000 and income
taxes of $12,383,000 due to the increased level of activities, with the balance
being contributed by several items. Among the principal uses of cash in
operating activities in 1995 were an increase in the level of accounts
receivable of $15,731,000, with the balance being contributed by several items.
The principal factors in the application of $14,215,000 to investing activities
were the net increases in property, plant and equipment of $10,933,000 and the
investment in joint ventures of $5,049,000, offset, in part, by the proceeds
from the net decrease in investments of $3,132,000.
The principal factor in the application of $10,269,000 to financing activities
was the early redemption of $10,000,000 of the Company's Subordinated
Debentures.
In addition to its cash and cash equivalents, at November 3, 1995, the Company's
investment portfolio, primarily U.S. Treasury Notes and certificates of deposit,
had a carrying value of $5,183,000. The Company also has a $10,000,000 credit
line with a domestic bank under a revolving credit agreement which expires in
February 1996, together with $3,500,000 of credit lines with foreign banks. The
Company anticipates that the domestic credit line will be renewed. The Company
had outstanding bank borrowings of $5,154,000 at November 3, 1995 under such
lines. In addition, the Company has the right to sell up to $15,000,000 of
additional receivables under its existing receivables sales program.
The Company believes 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,
although it currently expects to expend approximately $4,500,000 to upgrade its
Uruguayan printing equipment and facility in fiscal 1996. The Company may
determine, from time-to-time in the future, to buy shares of its common stock
and/or additional debentures in the market or in privately negotiated
transactions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- 27 -
28
ERNST & YOUNG LLP 787 Seventh Avenue Phone #: 212-773-3000
New York, New York 10019
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Volt Information Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Volt Information
Sciences, Inc. and subsidiaries as of November 3, 1995 and October 28, 1994, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended November 3, 1995. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Volt
Information Sciences, Inc. and subsidiaries at November 3, 1995 and October 28,
1994, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended November 3, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note F to the consolidated financial statements, in 1993, the
Company changed its method of accounting for income taxes, in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
Ernst & Young LLP
January 2, 1996
- 28 -
29
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November October
3, 1995 28, 1994
------------ ------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note A $ 25,350,000 $ 17,049,000
Short-term investments--Notes B and I 1,047,000 4,974,000
Trade accounts receivable less
allowances of $3,943,000 (1995)
and $4,027,000 (1994)--Note C
and Schedule II 111,696,000 98,795,000
Inventories--Notes A and D 28,207,000 27,239,000
Deferred income taxes--Notes A and F 8,711,000 2,966,000
Prepaid expenses and other assets 7,204,000 4,387,000
------------ ------------
TOTAL CURRENT ASSETS 182,215,000 155,410,000
INVESTMENTS IN SECURITIES--
Notes B and I and Schedule II 4,136,000 3,121,000
INVESTMENTS IN JOINT VENTURES--
Note M 13,903,000 11,997,000
PROPERTY, PLANT AND EQUIPMENT--
at cost--Notes A, G and J
Land and buildings 33,591,000 33,513,000
Machinery and equipment 51,233,000 42,175,000
Leasehold improvements 2,818,000 2,819,000
------------ ------------
87,642,000 78,507,000
Less allowances for depreciation
and amortization 32,057,000 28,555,000
------------ ------------
55,585,000 49,952,000
DEPOSITS, RECEIVABLES
AND OTHER ASSETS 2,764,000 1,562,000
INTANGIBLE ASSETS--net of accumulated
amortization of $4,181,000 (1995) and
$3,495,000 (1994)--Notes A and F 5,408,000 4,862,000
------------ ------------
$264,011,000 $226,904,000
============ ============
November October
3, 1995 28, 1994
------------ ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note E $ 5,154,000 $ 4,925,000
Current portion of long-term debt--
Note G 2,000,000 2,000,000
Accounts payable 30,786,000 25,018,000
Accrued expenses
Wages and commissions 23,403,000 19,859,000
Taxes other than income taxes 10,059,000 8,917,000
Insurance 18,893,000 15,039,000
Other 6,686,000 5,639,000
Customer advances and other liabilities 15,250,000 11,610,000
Income taxes--Notes A and F 12,401,000 564,000
------------ ------------
TOTAL CURRENT LIABILITIES 124,632,000 93,571,000
LONG-TERM DEBT--Note G 28,819,000 40,788,000
DEFERRED INCOME TAXES--
Notes A and F 3,433,000 2,700,000
------------ ------------
156,884,000 137,059,000
STOCKHOLDERS' EQUITY--Notes
A,B,C,G,H and M and Schedule II
Preferred stock, par value $1.00
Authorized--500,000 shares;
issued--none
Common stock, par value $.10
Authorized--15,000,000 shares;
issued--9,664,794 (1995)
and 7,789,580 shares (1994) 966,000 779,000
Paid-in capital 27,098,000 43,830,000
Retained earnings 79,157,000 91,655,000
Unrealized foreign currency
translation adjustments (168,000) (283,000)
Unrealized gain (loss) on
marketable securities 74,000 (47,000)
------------ ------------
107,127,000 135,934,000
Less 2,986,554 common shares
held in the treasury at cost -- 46,089,000
------------ ------------
107,127,000 89,845,000
COMMITMENTS--Note I
------------ ------------
$264,011,000 $226,904,000
============ ============
See Notes to Consolidated Financial Statements.
- 29 -
30
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED
----------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
------------ ------------ ------------
Revenues:
Sales of services--Note L $837,699,000 $656,212,000 $501,028,000
Sales of products 69,608,000 64,659,000 57,080,000
------------ ------------ ------------
Total sales 907,307,000 720,871,000 558,108,000
Interest income 2,009,000 1,336,000 1,381,000
Gains (losses) on securities-net (7,000) 199,000
Equity in income (loss) of joint ventures--Note M (1,000,000) 3,055,000 4,940,000
Gain on sale of joint venture--Note M 9,770,000
Other income (expense)-net--Notes C and G (954,000) (539,000) 545,000
------------ ------------ ------------
907,362,000 734,486,000 565,173,000
------------ ------------ ------------
Costs and expenses:
Cost of sales:
Services--Note L 761,240,000 603,607,000 467,710,000
Products 47,104,000 41,984,000 34,435,000
Selling and administrative 45,657,000 43,075,000 40,108,000
Research and development 6,989,000 6,262,000 5,830,000
Engineering 1,273,000 1,479,000 1,037,000
Depreciation and amortization 11,959,000 10,745,000 10,191,000
Foreign exchange (gain) loss-net--Note A (186,000) 39,000 378,000
Interest expense 6,045,000 7,468,000 11,078,000
------------ ------------ ------------
880,081,000 714,659,000 570,767,000
------------ ------------ ------------
Income (loss) before income taxes and
items shown below--Note L 27,281,000 19,827,000 (5,594,000)
Income tax provision (benefit)--Notes A and F 10,895,000 7,783,000 (1,920,000)
------------ ------------ ------------
Income (loss) before extraordinary item and
cumulative effect of a change in accounting 16,386,000 12,044,000 (3,674,000)
Extraordinary item-loss on repurchase of debt,
net of income taxes--Note G (62,000) (271,000)
------------ ------------ ------------
Income (loss) before cumulative effect of a
change in accounting 16,324,000 11,773,000 (3,674,000)
Cumulative effect of a change in accounting
for income taxes--Note F 959,000
------------ ------------ ------------
NET INCOME (LOSS) $ 16,324,000 $ 11,773,000 $ (2,715,000)
============ ============ ============
Per Share Data
Income (loss) before extraordinary item and
cumulative effect of a change in accounting 1.70 $ 1.26 $ (.38)
Extraordinary item (.01) (.03)
------------ ------------ ------------
Income (loss) before cumulative effect
of a change in accounting 1.69 1.23 (.38)
Cumulative effect of a change in accounting .10
------------ ------------ ------------
Net income (loss) $ 1.69 $ 1.23 $ (.28)
============ ============ ============
Number of shares used in computation--Note A 9,634,334 9,605,492 9,597,726
============ ============ ============
See Notes to Consolidated Financial Statements.
- 30 -
31
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unrealized
Foreign Unrealized
Common Stock Currency Gain (Loss)
$.10 Par Value Paid-In Retained Translation On Marketable Treasury
Shares Amount Capital Earnings Adjustment Securities Stock
--------- --------- ------------ ------------ ---------- ------------- ------------
Balance at October 30, 1992 7,789,580 $ 779,000 $ 43,755,000 $ 82,597,000 $ (521,000) -- $ (46,230,000)
Contribution to ESOP
-10,145 shares 62,000 113,000
Stock award--1,500 shares 6,000 17,000
Unrealized foreign currency
translation adjustment--net of
$100,000 tax benefit (185,000)
Net loss for the year (2,715,000)
--------- --------- ------------ ------------ ---------- -------- -------------
Balance at October 29, 1993 7,789,580 779,000 43,823,000 79,882,000 (706,000) -- (46,100,000)
Stock award--1,000 shares 7,000 11,000
Unrealized foreign currency
translation adjustment--net of
taxes of $338,000 423,000
Unrealized loss on marketable
securities-net of $30,000
tax benefit (47,000)
Net income for the year 11,773,000
--------- --------- ------------ ------------ ---------- -------- -------------
Balance at October 28, 1994 7,789,580 779,000 43,830,000 91,655,000 (283,000) (47,000) (46,089,000)
Contribution to ESOP-8,621 shares 154,000 96,000
Stock options exercised, including
related tax benefit of $130,000 22,750 3,000 469,000
Cancellation of treasury stock (2,977,933) (298,000) (16,873,000) (28,822,000) 45,993,000
Issuance shares of common
stock resulting from two-for-one
stock split in the form of a 100%
stock dividend 4,830,397 482,000 (482,000)
Unrealized gain on marketable
securities-net of taxes of $78,000 121,000
Unrealized foreign currency
translation adjustment--net of
taxes of $58,000 115,000
Net income for the year 16,324,000
--------- --------- ------------ ------------ ---------- -------- -------------
Balance at November 3, 1995 9,664,794 $ 966,000 $ 27,098,000 $ 79,157,000 $(168,000) $ 74,000 $ --
========= ========= ============ ============ ========== ======== =============
There were no shares of preferred stock issued or outstanding.
See Notes to Consolidated Financial Statements.
- 31 -
32
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED
--------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
------------ ------------ ------------
CASH PROVIDED BY (APPLIED TO) OPERATING
ACTIVITIES
Net income (loss) $ 16,324,000 $ 11,773,000 $ (2,715,000)
Adjustments to reconcile to cash provided
by operating activities:
Extraordinary loss 62,000 271,000
Cumulative effect of a change in accounting (959,000)
Depreciation and amortization 11,959,000 10,745,000 10,191,000
Equity in net (income) loss of joint ventures 1,000,000 (3,055,000) (4,940,000)
Gain on sale of joint venture (9,770,000)
Distributions from joint ventures 2,316,000 3,036,000 4,779,000
Accounts receivable provisions 2,081,000 1,903,000 1,489,000
Amortization of deferred debenture costs,
debt discounts and other deferred expenses 903,000 846,000 630,000
(Gains) losses on foreign currency translation 102,000 755,000 (1,015,000)
Gains on dispositions of property,
plant and equipment (354,000) (68,000) (23,000)
Deferred income tax expense (benefit) (5,419,000) 816,000 1,123,000
(Gains) losses on sales of securities 7,000 (199,000)
Other (20,000) 24,000 52,000
Changes in operating assets and liabilities:
Proceeds from the initial sale of accounts receivable 24,899,000
Increase in accounts receivable,
exclusive of above (15,731,000) (27,226,000) (16,433,000)
(Increase) decrease in inventories (3,124,000) 526,000 (2,474,000)
(Increase) decrease in recoverable income taxes 4,695,000 (4,695,000)
(Increase) decrease in prepaid expenses
and other current assets (2,892,000) 666,000 (1,170,000)
(Increase) decrease in other assets (1,494,000) 1,654,000 7,476,000
Increase (decrease) in accounts payable 1,788,000 (108,000) 8,960,000
Increase in accrued expenses 10,596,000 11,164,000 5,573,000
Increase in customer advances
and other liabilities 3,635,000 4,928,000 643,000
Increase (decrease) in income taxes payable 12,383,000 931,000 (417,000)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 34,115,000 14,513,000 30,775,000
============ ============ ============
CASH PROVIDED BY (APPLIED TO)
INVESTING ACTIVITIES
Sales of investments 1,050,000 6,851,000 2,588,000
Maturities of investments 10,770,000 12,602,000 800,000
Purchases of investments (8,688,000) (19,888,000) (6,824,000)
Investment in joint ventures (5,049,000) (2,517,000)
Proceeds from sale of a joint venture 16,382,000
Proceeds from disposals of property, plant and equipment 953,000 258,000 165,000
Purchases of property, plant and equipment (11,886,000) (14,916,000) (11,345,000)
Other (1,365,000)
------------ ------------ ------------
NET CASH APPLIED TO INVESTING ACTIVITIES (14,215,000) (1,228,000) (14,616,000)
============ ============ ============
- 32 -
33
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
YEAR ENDED
------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
-------- -------- --------
CASH PROVIDED BY (APPLIED TO)
FINANCING ACTIVITIES
Payment of long-term debt (12,000,000) (45,400,000) (8,045,000)
Proceeds from long-term debt 10,000,000
Exercises of stock options 341,000
Increase (decrease) in notes payable-banks 1,030,000 (948,000) 3,742,000
----------- ------------ -----------
NET CASH APPLIED TO FINANCING
ACTIVITIES (10,629,000) (36,348,000) (4,303,000)
----------- ------------ -----------
Effect of exchange rate changes on cash (970,000) (969,000) 668,000
----------- ------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,301,000 (24,032,000) 12,524,000
Cash and cash equivalents, beginning of year 17,049,000 41,081,000 28,557,000
----------- ------------ -----------
CASH AND CASH EQUIVALENTS,
END OF YEAR $25,350,000 $ 17,049,000 $41,081,000
=========== ============ ===========
SUPPLEMENTAL INFORMATION
Cash Paid During The Year
Interest expense $6,512,000 $8,846,000 $11,260,000
Income taxes, net of refunds $4,058,000 $1,416,000 $1,892,000
See Notes to Consolidated Financial Statements.
-33-
34
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business: The Company operates primarily in five industry segments:
Technical Services and Temporary Personnel; Electronic Publication and
Typesetting Systems; Telephone Directory; Engineering and Construction; and
Computer Systems.
Fiscal Year: The Company's fiscal year consists of the 52 or 53 weeks
ending on the Friday nearest October 31. The 1995 fiscal year was comprised of
53 weeks, compared with 52 weeks in fiscal years 1994 and 1993.
Consolidation: The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
transactions have been eliminated upon consolidation. The Company has
investments in joint ventures which are accounted for by the equity method.
Revenue Recognition: Sales are recorded when products are shipped and
when services are rendered. Revenues and costs applicable to long-term
contracts, including those providing for software customization or modification,
are recognized on the percentage-of-completion method, measured by work
performed, or the completed-contract method, as appropriate. Provisions for
estimated losses on contracts are recorded when such losses become evident.
Cash Equivalents: Cash equivalents consist of investments in short-term,
highly liquid securities having an initial maturity of three months or less.
Inventories: Manufacturing inventories are priced at the lower of cost,
on a first-in first-out basis, or market. Accumulated unbilled costs on
contracts related to performing services are carried at the lower of actual cost
or realizable value.
Property, Plant and Equipment: Depreciation and amortization are
provided on the straight-line and accelerated methods at rates calculated to
write off the cost of the assets over their estimated useful lives. Fully
depreciated assets are written off against their related allowance accounts. The
assets are depreciated over the following periods:
Buildings - 25 to 31 1/2 years
Machinery and equipment - 3 to 7 years
Leasehold improvements - length of lease or life of asset,
whichever is shorter
Intangible Assets: Intangible assets principally consist of the
unamortized balances of the excess of cost over the fair value of the net assets
of companies acquired. The intangibles are being amortized using the
straight-line method, principally over fifteen years.
-34-
35
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Income Taxes: Effective at the beginning of fiscal year ended October
29, 1993, the Company changed its method of accounting for income taxes to the
liability method in accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (see Note F).
Translation of Foreign Currencies: The U.S. dollar is the Company's
functional currency throughout the world, except for the Company's Uruguayan
operation and its joint ventures in Australia and Brazil. Where the U.S. dollar
is used as the functional currency, and in Uruguay and Brazil, which have high
inflation rates, foreign currency gains and losses are included in operations.
Translation adjustments due to the Company's investment in its Australian joint
venture, whose functional currency is its local currency, are recorded as a
separate component of stockholders' equity.
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. Per share data have been adjusted retroactively for the effect of
a two-for-one stock split distributed on October 6, 1995.
NOTE B--INVESTMENTS IN SECURITIES
Effective October 28, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" issued by the Financial Accounting Standards Board
in May 1993. Adoption of Statement No. 115 did not have a material effect on the
Company's financial statements. In accordance with the statement, management
determines the appropriate classification of debt securities at the time of
purchase and re-evaluates such designation as of each balance sheet date. Debt
securities are classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost. Marketable equity securities and debt
securities not classified as held-to-maturity are classified as
available-for-sale. Available-for-sale securities are carried at fair value with
the unrealized gains and losses, net of tax, reported as a separate component of
stockholders' equity. At November 3, 1995, short-term investments consist
principally of bank certificates of deposit which mature within one year and are
intended to be held to maturity. Non-current investments at such date consist
principally of U.S. treasury notes maturing in 1997 classified as
available-for-sale. At November 3, 1995, the Company's portfolio of marketable
securities had a market value of $5,183,000 and an amortized cost of $5,061,000.
Gross unrealized holding gains of $122,000 are shown as an addition to
stockholders' equity. At October 28, 1994, portfolio securities, which consisted
principally of U.S. treasury notes and commercial paper, had a market value of
$8,095,000 and an amortized cost of $8,172,000, with unrealized holding losses
of $77,000 shown as a reduction to stockholders' equity.
-35-
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VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE C--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, interest in new
receivables may be sold up to the $45,000,000 level. At November 3, 1995 and
October 28, 1994, $30,000,000 and $25,000,000, 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 cost incurred on short-term commercial paper which financed the
purchase of receivables. Other income (expense) in the accompanying 1995, 1994
and 1993 statements of income includes fees (including professional fees in
1993) related to the agreement of $2,133,000, $1,557,000 and $849,000,
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 stated maximum ratio
of debt to tangible net worth.
NOTE D--INVENTORIES
Inventories consist of:
November October
3, 1995 28, 1994
-------- --------
(Dollars in thousands)
Services:
Accumulated unbilled costs on:
Service contracts $15,909 $ 9,521
Long-term contracts 2,980 10,277
------- -------
18,889 19,798
------- -------
Products:
Materials 3,441 2,399
Work-in-progress 1,377 1,301
Service parts 1,124 949
Finished goods 3,376 2,792
------- -------
9,318 7,441
------- -------
Total $28,207 $27,239
======= =======
The cumulative amounts billed, principally under long-term contracts, of
$3,469,000 at November 3, 1995 and $39,179,000 at October 28, 1994, are credited
against the related costs in inventory. Substantially all of the amounts billed
have been collected.
-36-
37
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E--SHORT-TERM BORROWINGS
The Company has credit lines with a domestic bank and foreign banks which
provide for unsecured borrowings and letters of credit up to an aggregate of
$13,500,000. On December 2, 1994, the Company entered into a revolving credit
agreement, as amended in March 1995, which extended the domestic credit line of
$10,000,000 to February 1996, and contains various financial covenants. The
Company anticipates that the credit line will be renewed. At November 3, 1995,
the Company had outstanding domestic bank borrowings of $700,000 ($700,000 -
1994) and foreign bank borrowings of $4,454,000 ($4,225,000 - 1994). The
weighted average interest rate of short-term borrowings at each year-end was 20%
in 1995 and 35.4% in 1994. The weighted average interest rates are high due to a
high proportion of the borrowings by the Uruguayan operation, whose interest
rates are affected by their high inflation level. Borrowings in Uruguay are used
to hedge receivables against a loss in value due to the strengthening of the
U.S. dollar against the Uruguayan currency.
NOTE F--INCOME TAXES
Effective as of the beginning of fiscal 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and the tax bases of assets and
liabilities and are measured using enacted tax rates and laws that are scheduled
to be in effect when the differences are scheduled to reverse. Prior to the
adoption, income tax expense was determined using the liability method
prescribed by Statement No. 96, which is superceded by Statement No. 109. Among
other changes, Statement No. 109 changes the recognition and measurement
criteria for deferred tax assets included in Statement No. 96.
As permitted by Statement No. 109, the Company has elected not to restate the
financial statements of any prior years. The cumulative effect of adopting
Statement No. 109 at the beginning of the 1993 fiscal year was to increase net
income by $959,000, or $.10 per share, including $432,000 attributable to a
corporate joint venture (see Note M).
-37-
38
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
Year Ended
-------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
-------- -------- --------
(Dollars in thousands)
The components of income (loss) before
income taxes based on the location of
operations, consist of the following:
Domestic $ 23,975 $ 16,322 $(8,667)
Foreign 3,306 3,505 3,073
-------- -------- -------
$ 27,281 $ 19,827 $(5,594)
======== ======== =======
Income tax provision (benefit) includes:
Current:
Federal $ 12,201(a) $ 4,585(a) $(3,660)(a)
Foreign 1,247 1,233 493
State and local 2,866 1,149 124
-------- -------- -------
Total current 16,314 6,967 (3,043)
-------- -------- -------
Deferred:
Federal (4,357) 494 1,338
Foreign 140 153 (269)
State and local (1,202) 169 54
-------- -------- -------
Total deferred (5,419) 816 1,123
-------- -------- -------
Total income tax provision (benefit) $ 10,895 $ 7,783 $(1,920)
======== ======== =======
(a) Reduced in 1995 by $758,000 of foreign tax credit carryforwards and reduced
in 1995 and 1994 and increased in 1993, respectively, by benefits of $247,000,
$374,000 and $248,000 from general business credits.
The consolidated effective tax rates are different than the U.S. Federal
statutory rate. The differences result from the following:
Year Ended
------------------------------------
November October October
3, 1995 29, 1994 29, 1993
-------- -------- --------
Statutory rate 35.0% 35.0% (34.0)%
State and local taxes, net of federal
tax benefit 3.9 4.6 2.1
Tax effect of foreign operations 1.1 1.6 (2.4)
Goodwill amortization .8 1.0 3.4
Utilization of net operating loss carryforward (2.5) (2.4)
General business credits (.9) (1.9) (4.4)
Other - net 2.5 1.4 1.0
---- ---- -----
Effective tax rate 39.9% 39.3% (34.3)%
==== ==== =====
-38-
39
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
November October
3, 1995 28, 1994
-------- --------
(Dollars in thousands)
Deferred Tax Assets:
Allowance for doubtful accounts $ 1,597 $ 1,433
Inventory valuation 4,818
Domestic net operating loss
carryforwards 767 1,725
Foreign tax credit carryforwards 1,363 2,124
Vacation accruals 1,198 831
Warranty accruals 419 513
Foreign asset bases 300 440
Other--net 414 1,594
-------- -------
Total deferred tax assets
10,109 7,702
Valuation allowance for deferred
tax assets
1,477 3,002
-------- -------
Net deferred tax assets
8,632 4,700
-------- -------
Deferred Tax Liabilities:
Unremitted earnings of corporate
joint ventures 1,924 1,678
Earnings of joint ventures not
currently taxable 462 462
Inventory valuation 1,361 265
Accelerated depreciation 968 933
-------- -------
Total deferred tax liabilities 3,354 4,434
-------- -------
Net deferred tax assets $ 5,278 $ 266
======== =======
Balance sheet classification:
Current assets $ 8,711 $ 2,966
Noncurrent liabilities (3,433) (2,700)
-------- -------
Net deferred tax assets $ 5,278 $ 266
======== =======
-39-
40
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
As of November 3, 1995, for tax purposes, the Company had foreign tax credit
carryforwards of $1,363,000, which will expire from 1996 through 2000. For
financial statement purposes, a valuation allowance has been recognized to
offset the deferred tax asset related to these carryforwards.
The valuation allowance was decreased during fiscal 1995 by $1,525,000 as a
result of the utilization of a domestic net operating loss and foreign tax
credit carryforwards. The utilization of such carryforwards resulted in a
$1,424,000 reduction to income tax expense and a $104,000 reduction to goodwill.
The valuation allowance was decreased during fiscal 1994 by $867,000 primarily
as a result of the utilization of domestic net operating loss carryforwards,
partially offset by additional foreign tax credit carryforwards, which arose
during such year, whose use is subject to limitations. The utilization of the
net operating loss resulted in a $479,000 reduction to income tax expense and a
$479,000 reduction to goodwill. The valuation allowance was increased in fiscal
1993 by $940,000 primarily as a result of additional foreign tax credit
carryforwards, which arose during such year, whose use is subject to
limitations.
Income taxes are provided on the undistributed earnings of the Australian
corporate joint venture, as remittances of such earnings are anticipated.
Undistributed earnings of foreign subsidiaries ($4,053,000) at November 3, 1995
are considered permanently invested and, accordingly, no federal income taxes
have been provided. Upon the effectiveness of the merger referred to in Note P,
substantially all such earnings will be deemed distributed to the Company.
However, available tax credits are anticipated to eliminate any federal income
tax resulting from such deemed distribution.
-40-
41
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE G--LONG-TERM DEBT
Long-term debt consists of the following:
November October
3, 1995 28, 1994
-------- --------
(Dollars in thousands)
12-3/8% Senior Subordinated Debentures, due
July 1, 1998--net of unamortized discount of
$36,000 - 1995 and $67,000 - 1994 - (a) $22,819 $32,788
Term Loan - (b) 8,000 10,000
------- -------
30,819 42,788
Less amounts due within one year 2,000 2,000
------- -------
Total long-term debt $28,819 $40,788
======= =======
(a) The debentures provide for interest to be paid semi-annually on January 1
and July 1 and are redeemable at the option of the Company, in whole or in part,
at 100% plus accrued interest. In May 1995, and during fiscal 1994,
respectively, the Company redeemed $10,000,000 and $30,000,000 of the debentures
resulting in extraordinary charges of $62,000 and $271,000, net of income tax
benefits of $42,000 and $157,000, respectively. The debentures are subordinated
to all existing and future senior indebtedness (as defined) of the Company. At
November 3, 1995, the amount available for dividends, pursuant to the terms of
the indenture under which the debentures are issued, was $32,388,000 and, if no
dividend payments are made, the amount available for capital stock repurchases
was $42,388,000. However, under the terms of the term loan agreement, at such
date, only $17,265,000 was available for such payments (see (b) below).
(b) In October 1994, the Company repaid a mortgage liability of $15,400,000 and
concurrently two subsidiaries of the Company entered into a $10,000,000
five-year loan agreement with National Westminster Bank which is secured by a
deed of trust on land and buildings (book value at November 3, 1995 -
$15,428,000). The obligation is guaranteed by the Company. 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 $84,000,000.
The fair value of the Company's total debt as of November 3, 1995 and October
28, 1994, approximated the carrying value based upon quotations obtained for the
debentures and the maturity and terms of the other debt.
-41-
42
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--STOCK OPTION PLAN
The Non-Qualified Stock Option Plan adopted by the Company in fiscal 1980
terminated on June 30, 1990, except for options previously granted under the
plan. Unexercised options expire ten years after grant. Outstanding options
at November 3, 1995 were granted at 100% of the market price on the date of
grant and became exercisable cumulatively in increments of 20% per year in each
of the second through sixth years after date of grant.
In May 1995, the Company adopted a new Non-Qualified Stock Option Plan which
provides for the granting of options to acquire up to 800,000 shares of Common
Stock to key employees of the Company. The option price may not be less than
the fair market value of a share on the date the option is granted. The date
each option becomes exercisable and the term of the option, which may not
exceeds ten years, are at the discretion of the Company. As of November 3,
1995, none of these options have been granted by the Company.
Transactions involving outstanding stock options were:
Number Total
of Option
Shares Price
------- -------
(Dollars in thousands)
Outstanding, October 30, 1992 147,750 $2,850
Cancelled (15,300) (335)
------- ------
Outstanding, October 29, 1993 132,450 2,515
Cancelled (1,000) (16)
------- ------
Outstanding, October 28, 1994 131,450 2,499
Cancelled (2,500) (63)
Exercised (22,750) (341)
Stock Split (See Note K) 110,200
------- ------
Outstanding, November 3, 1995 216,400 $2,095
======= ======
Exercisable November 3, 1995
at prices ranging from $6.00-$13.75 216,400
=======
In conjunction with the acquisition of a subsidiary in 1986, non-qualified
stock options to purchase a total of 100,000 shares of the Company common stock
at a price of $13.75 per share (adjusted for the stock split in 1995) were
granted to four of the sellers. As of November 3, 1995, none of these options
have been exercised.
- 42 -
43
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--COMMITMENTS
The future minimum rental commitments as of November 3, 1995 for all
noncancellable operating leases are as follows:
Fiscal Office
Year Total Space Equipment
- ------ ------- ------- -----------
(Dollars in thousands)
1996 $6,335 $6,138 $197
1997 4,092 3,953 139
1998 2,690 2,617 73
1999 1,363 1,363 --
2000 819 819 --
Thereafter 1,251 1,251 --
------- ------- ----
$16,550 $16,141 $409
======= ======= ====
Rental expense for all operating leases for fiscal years 1995, 1994 and 1993
was $8,638,000, $10,075,000 and $9,741,000, respectively. Many of the leases
also require the Company to pay or contribute to property taxes, insurance and
ordinary repairs and maintenance.
The Company has guaranteed the performance of a subsidiary under a contract and
also guaranteed the commitments of a joint venture. At November 3, 1995,
outstanding letters of credit of $4,550,000 were issued by banks in support of
these guarantees which were secured by $4,333,000 of the Company's investments
in securities. The letters of credit expire in fiscal 1996, unless renewed,
and the Company believes that risk of loss relative to these financial
guarantees is remote.
NOTE J--INDUSTRY SEGMENTS
Financial data concerning the Company's sales, operating profit (loss) and
identifiable assets by industry segments for the fiscal years 1995, 1994 and
1993 are presented in tables under Item 1 of Form 10-K and are included herein
by reference.
Total revenues include both sales to unaffiliated customers, as reported in the
Company's consolidated statements of operations, and intersegment sales. Sales
between segments are generally priced at cost. Operating profit (loss) is
comprised of total revenues less operating expenses. In computing operating
profit (loss), none of the following items have been added or deducted:
general corporate expense; interest expense; fees related to sales of accounts
receivable; corporate interest income and income taxes. Identifiable assets
are those assets that are used in the Company's operations in each industry
segment. Corporate assets consist principally of cash and cash equivalents,
investments and investments in joint ventures.
- 43 -
44
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE J--INDUSTRY SEGMENTS--Continued
Capital expenditures and depreciation and amortization by the Company's
industry segments are as follows:
Capital Expenditures
Year Ended
----------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
----------- ----------- ----------
(Dollars in thousands)
Technical Services and Temporary Personnel $ 2,336 $ 1,401 $ 876
Electronic Publication and Typesetting Systems 1,620 2,590 1,643
Telephone Directory 2,145 1,660 1,585
Engineering and Construction 4,032 3,528 1,936
Computer Systems 7,599 3,937 6,878
------- ------- -------
Total segments 17,732 13,116 12,918
Corporate 459 1,129 211
------- ------- -------
$18,191 $14,245 $13,129
======= ======= =======
Depreciation and Amortization
Year Ended
----------------------------------------------
November October October
3, 1995 28, 1994 29, 1993
----------- ----------- -----------
(Dollars in thousands)
Technical Services and Temporary Personnel $ 1,439 $ 1,123 $ 1,071
Electronic Publication and Typesetting Systems 1,800 1,597 1,720
Telephone Directory 1,883 2,100 2,905
Engineering and Construction 2,206 2,040 1,528
Computer Systems 4,005 3,000 2,308
------- ------- -------
Total segments 11,333 9,860 9,532
Corporate 626 885 659
------- ------- -------
$11,959 $10,745 $10,191
======= ======= =======
- 44 -
45
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
fiscal years ended November 3, 1995 and October 28, 1994. Each quarter
contains thirteen weeks except for the fourth quarter of fiscal year 1995 which
has fourteen weeks.
Fiscal 1995 Quarter
--------------------------------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
(Dollars in thousands, except per share amounts)
Net sales $183,296 $190,596 $225,924 $307,491
======== ======== ======== ========
Gross profit $ 20,586 $ 18,750 $ 23,818 $ 35,809
======== ======== ======== ========
Income before extraordinary item $ 2,023 $ 1,430 $ 5,056 $ 7,877
Extraordinary item (62)
-------- -------- -------- --------
Net income $ 2,023 $ 1,430 $ 4,994 $ 7,877
======== ======== ======== ========
Income (loss) per share: (a)
Income before extraordinary item $.21 $.15 $.53 $.82
Extraordinary item (.01)
---- ---- ---- ------
Net income $.21 $.15 $.52 $.82
==== ==== ==== ====
Fiscal 1994 Quarter
--------------------------------------------------------------------
First Second Third Fourth
-------- -------- -------- --------
(Dollars in thousands, except per share amounts)
Net sales $142,554 $161,685 $165,937 $250,695 (c)
======== ======== ======== ========
Gross profit $ 11,657 $ 16,504 $ 18,137 $ 28,982
======== ======== ======== ========
Income (loss) before extraordinary item $ (1,963) $ 5,801 (b) $ 2,294 $ 5,912
Extraordinary item (189) (82)
-------- -------- -------- --------
Net income (loss) $ (2,152) $ 5,801 $ 2,212 $ 5,912
======== ======== ======== ========
Income (loss) per share: (a)
Income (loss) before extraordinary item $(.21) $.61 $.24 $.62
Extraordinary item (.02) (.01)
----- ---- ---- ----
Net income (loss) $(.23) $.61 $.23 $.62
===== ==== ==== ====
(a) Per share amounts have been restated to reflect a two-for-one stock split
of the Company's common stock which was effected by a 100% stock dividend,
distributed on October 6, 1995 to shareholders of record as of the close of
business on September 12, 1995.
(b) Includes a gain of $5,760,000, net of income taxes, or $.60 per share, from
the sale of 50% interest in a joint venture.
(c) Includes $59,000,000 from acceptance by a customer of a major directory
assistance system in such quarter. As a result of provisions for losses in
fiscal 1993, for costs not recoverable related to such contract, the sale had
no effect on earnings for the fiscal 1994 fourth quarter.
- 45 -
46
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)--Continued
Historically, the Company's results of operations have been adversely affected
in the first fiscal quarter, as a result of reduced requirements for its
technical and temporary personnel due to the holiday season. An Australian
joint venture (see Note M) produces a major portion of its revenues and
significantly all of its profits in the Company's second and third fiscal
quarters.
NOTE L--CERTAIN SIGNIFICANT ITEMS INCLUDED IN OPERATIONS
The results of operations for fiscal 1993 include a pretax charge of $6,400,000
($.44 per share) for costs not recoverable under two contracts for major
directory assistance systems. In fiscal 1994 and 1995, the Company received
customer acceptance under such contracts, which, because of the pretax charge
in fiscal 1993, had no effect on the Company's earnings for 1994 and 1995,
although revenues (and costs) of $59,000,000 and $15,000,000 were recognized in
1994 and 1995, respectively. Revenue from the customer recognized during
fiscal 1994 represented approximately 11% of the Company's total revenue for
such year. Operations in 1993 also included a pretax charge of $849,000 ($.06
per share) incurred in connection with a revolving financing agreement (see
Note C).
NOTE M--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.
Telstra owns 50% of the voting stock of Pacific Access. In the event of a
change in the control of the Company, as defined, the Company may be required
to sell its shares of the venture to Telstra at a formula price based upon
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 November 3, 1995, the Company made investments in and loans
aggregating $7,568,000 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 agreement resulted in the acquisition
of a 50% interest in the common shares together with 75% of the issued
preferred stock and 75% of the debt financing provided by the venturers. The
agreement, as amended, requires the Company to invest additional amounts in the
joint venture, as well as provide technology, expertise and key personnel in
directory production, sales and marketing.
- 46 -
47
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES--Continued
As a result of the funding requirements, during the start-up period, the
Company is recognizing 75% of the losses incurred by the venture. At such time
as the venture becomes profitable, the Company will recognize 75% of the
venture's net income until start-up losses are recovered and 50% of any profits
subsequent thereto.
Effective February 28, 1994, the Company's 50% interest in Pacific Volt
Information Systems, a joint venture with a subsidiary of Pacific Bell
Directory, was redeemed by the venture for approximately $16,400,000. The sale
of the Company's interest resulted in a gain of $9,770,000 ($5,760,000, net of
income taxes, or $.60 per share).
The following summarizes certain financial information of the joint ventures:
November 3, 1995 October 28, 1994
---------------- ----------------
(Dollars in thousands)
Company's Company's
Total Equity Total Equity
-------- --------- -------- ---------
Current assets $270,495 $233,907
Noncurrent assets 17,207 16,629
Current liabilities (227,749) (198,521)
Noncurrent liability (259)
-------- --------
Equity of combined joint ventures $ 59,694 $ 52,015
======== ========
Equity of Australian joint venture (a) $ 55,733 $10,436 $ 48,987 $ 9,677
Equity of Brazilian joint venture 3,961 3,467 3,028 2,320
-------- ------- -------- -------
$ 59,694 $ 52,015
======== ========
Investments in joint ventures $13,903 $11,997
======= =======
(a)-Pursuant to the venture agreement, the initial capital contributions of all
venturers, other than Telstra, exceeded their proportionate share of ownership
interest in the corporate joint venture. The agreement provides that, upon
liquidation of the venture, the venturers will be entitled to recover such
excess contributions from the net assets of the venture.
-47-
48
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE M--SUMMARIZED FINANCIAL INFORMATION OF JOINT VENTURES--Continued
Year ended
--------------------------------------------------------------------------
November 3, 1995 October 28, 1994 October 29, 1993
---------------- ---------------- ----------------
(Dollars in thousands)
Company's Company's Company's
Total Equity Total Equity Total Equity
--------- --------- -------- --------- -------- ---------
Revenues $559,858 $509,481 $469,377
Cost and expenses 529,540 476,346 444,151
Income tax provision 11,632 11,321 9,609
------- -------- --------
Income before cumulative effect
of a change in accounting 18,686 21,814 15,617
Cumulative effect of a change in accounting
for Australian income taxes (a) 5,688
-------- -------- --------
Net income $ 18,686 $ 21,814 $ 21,305
======== ======== ========
Income of Australian joint ventures before
cumulative effect of a change in accounting $ 24,056 $ 2,904 $ 20,734 $ 2,591 $ 10,963 $2,613 (c)
Net loss of Brazilian joint venture (5,370) (3,904) (392) (197)
Net income of United States joint venture 1,472 (b) 661 4,654 2,327
-------- ------- -------- ------- -------- ------
$ 18,686 $ 21,814 $ 15,617
======== ======== ========
Company's equity in income (loss) of joint
ventures, exclusive of equity in cumulative
effect of a change in accounting $(1,000) $ 3,055 $4,940
======= ======= ======
(a) During the first quarter of fiscal 1993, the Company's Australian corporate
joint venture changed its method of accounting for income taxes by adopting
Statement of Financial Standards No. 109, "Accounting for Income Taxes." The
cumulative effect of the change increased the joint venture's income by
$5,688,000 due to its ability to recognize deferred Australian tax assets as
permitted by Statement No. 109. The Company's portion of this increase in
income, net of United States taxes, is $432,000 and is included in the
Company's cumulative effect of a change in accounting for income taxes.
(b) Represents income through February 28, 1994, the effective date of sale.
(c) The agreement for Pacific Access provided that the Company's share of
profits or losses from the joint venture through April 1993 could exceed
12-1/2% based on sales levels achieved. For fiscal 1993 based on the venture's
sales, the Company's share of the venture's income amounted to $2,310,000,
which exceeded 12-1/2% of the venture's income by $740,000.
Consolidated retained earnings at November 3, 1995 includes $4,940,000,
representing the undistributed earnings of the Australian joint venture.
United States income taxes have been provided for the anticipated remittance of
such earnings.
- 48 -
49
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE N--EMPLOYEE BENEFITS
The Company has a non-contributory Employee Stock Ownership Plan (ESOP) which
provides for open market or private purchases of Company common stock from
time-to-time, or contributions by the Company of unissued or treasury shares.
Discretionary contributions are made for all employees who have completed one
year of service for a participating employer. Vesting occurs at a rate of 25%
per year of service, commencing with the completion of three years of service.
For fiscal 1995, a contribution of $500,000 was accrued. For fiscal 1994,
$250,000 was accrued and treasury shares were contributed for payment thereof
in 1995. During fiscal 1993, there was no expense related to the ESOP.
The Company has savings plans which permit eligible employees to make
contributions on a pretax salary reduction basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. The Company does
not match employees' contributions.
NOTE O--FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to concentrations
of credit risk are primarily cash investments and accounts receivable. At
November 3, 1995, the Company's cash investments were primarily in investment
grade, short-term instruments. Concentrations of credit risk with respect to
the receivables are limited due to the large number of customers in the
Company's customer base, and their dispersion across different industries and
geographic areas.
The Company purchases foreign currency option contracts to hedge the adverse
impact on its foreign currency receivables and sales when the dollar
strengthens against the related foreign currencies. Foreign exchange (gains)
losses in the accompanying statements of operations include (1) any gain on
option contracts, which are recognized in income in the same period as losses
on the hedged receivables and reduced dollar amount of sales and (2) the
premium cost of option contracts, which is amortized over the contract period.
At November 3, 1995, the Company had purchased options, all of which expire in
fiscal 1996, at a cost of $100,000, to exchange various European currencies for
U.S. dollars, in the aggregate amount of $4,500,000. There were no unrealized
gains or losses on these contracts at such date.
The Company entered into an interest rate cap agreement with a bank to reduce
the impact of increases in interest rates on short-term commercial paper which
directly impacts costs connected with the sale of interests in accounts
receivable (see Note C). The agreement entitles the Company to receive
payments to the extent that interest rates on 30-day commercial paper in the
amount of $20,000,000 exceed 6.5% through March 1, 1996. The $465,000 fee paid
for this cap agreement is included in other assets and is being amortized over
the three-year term. At November 3, 1995, the amortized cost approximates the
fair value of the agreement.
Counterparties to the currency option contracts and interest rate cap agreement
are major banks. Credit loss from counterparty nonperformance is not
anticipated.
- 49 -
50
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE P--PENDING ACQUISITION
On October 5, 1995, an agreement and plan of merger was entered into by and
among the Company and Information International Inc. ("Triple-I"), a publicly
traded company in the business of electronic publishing prepress systems.
Pursuant to the agreement, Triple-I would be merged, together with the
Company's wholly-owned domestic and foreign subsidiaries which comprise the
Company's electronic publishing and typesetting systems segment ("Autologic"),
into a newly formed company Autologic Information International, Inc. ("AIII")
to be publicly traded. The Company would initially own approximately 59% and
the Triple-I shareholders would own approximately 41% of AIII. The merger,
which is to be accounted for as a purchase of a controlling 59% interest in
Triple-I and a sale of 41% of Autologic, is subject, among other conditions, to
approval of the merger agreement by the holders of a majority of the
outstanding shares of Triple-I common stock.
- 50 -
51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information called for by Part III (Items 10, 11, 12 and 13) of Form 10-K
(except information as to the Company's executive officers, which information
follows Item 4 in this Report) will be included in the Company's Proxy
Statement which the Company intends to file within 120 days after the close of
its fiscal year ended November 3, 1995, and is hereby incorporated by reference
to such Proxy Statement.
- 51 -
52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)(1). Financial Statements
The following consolidated financial statements of Volt
Information Sciences, Inc. and subsidiaries are included in
Item 8:
Page
----
Consolidated Balance Sheets--November 3, 1995 and
October 28, 1994. 29
Consolidated Statements of Operations--Years ended
November 3, 1995, October 28, 1994 and October 29, 1993. 30
Consolidated Statements of Stockholders' Equity--Years
ended November 3, 1995, October 28, 1994 and October 29,
1993. 31
Consolidated Statements of Cash Flows--Years ended
November 3, 1995 October 28, 1994 and October 29, 1993. 32
Notes to Consolidated Financial Statements. 34
14(a)(2). Financial Statement Schedules
The following consolidated financial statement schedule
of Volt Information Sciences, Inc. and subsidiaries is
included in response to Item 14(d).
Schedule II--Valuation and qualifying accounts S-1
Other schedules (Nos. I, III, IV and V) for which
provision is made in the applicable accounting regulation
of the Securities and Exchange Commission are not
required under the related instructions or are not
applicable and, therefore, have been omitted.
- 52 -
53
14 (a) (3). Exhibits
Exhibit Description
- ------- -----------
2.01 Asset Purchase and Sale Agreement entered into October 6, 1993
between the Company and Omnibus Funding Corporation, et. al.
(Exhibit 2.1 to the Company's Form 8-K, dated October 6, 1993,
File No. 1-9232)
2.02 Agreement and Plan of Merger dated as of October 5, 1995, as
amended on November 10, 1995 and December 7, 1995, among
Information International, Incorporated, Autologic, Inc., a
recently formed Delaware corporation, the name of which has
since been change to Autologic Information International,
Inc., and Volt Information Sciences, Inc., Incorporated by
Reference to Appendix I to the Registration Statement on Form
S-4 of Autologic Information International, Inc., (File No.
33-99278).
3.01(a) Restated Certificate of Incorporation of the Company, as filed
with the Department of State of New York on December 28, 1967
(Exhibit 3(a) to the Company's Registration Statement on Form
S-1, dated January 19, 1971, File No. 2-39320).
3.01(b) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on January 12, 1968 (Exhibit 3(b) to the
Company's Registration Statement on Form S-1, dated January
19, 1971, File No. 2-39320).
3.01(c) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on July 17, 1968 (Exhibit 3(c) to the
Company's Registration Statement on Form S-1, dated January
19, 1971, File No. 2-39320).
3.01(d) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on July 22, 1981 (Exhibit 4(a)(4) to the
Company's Registration Statements on Form S-16, dated July 30,
1981, File Nos. 2-73366 and 2-73367).
3.01(e) Certificate of Merger of Volt Information Sciences Capital
Corp. and VIS Capital Corp. into the Company, as filed with
the Department of State of New York on May 2, 1986 (Exhibit
(d)(v) to the Company's Registration Statement on Form 8-A,
filed August 7, 1986, File No. 1-9232).
- 53 -
54
14 (a) (3). Exhibits--Continued
Exhibit Description
- ------- -----------
3.01(f) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on June 13, 1988 (Exhibit 4.01 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
July 29, 1988).
3.02 By-Laws of the Company (Exhibit 4.02 to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 29,
1988).
4.01(a) Form of Indenture, dated as of April 15, 1983 among the
Company, VIS Capital Corp. and BankAmerica Trust Company of
New York, as Trustee, including on pages 1-8 thereof, the full
text of the 12-3/8% Senior Subordinated Debentures and
Guarantees (Exhibit 4.01 to the Company's Registration
Statement on Form S-2, dated May 3, 1983, File No. 2-83260).
4.01(b) Form of Supplemental Indenture, dated as of May 2, 1986,
between the Company and BankAmerica Trust Company, as Trustee
(Exhibit (g)(ii) to the Company's Registration Statement on
Form 8-A, filed August 7, 1986, File No. 1-9232).
10.01(a)* Non-Qualified Stock Option Incentive Plan, as amended
September 29, 1980 (Exhibit 10.12(b) to the Company's
Registration Statement on Form S-7, dated February 4, 1981,
File No. 2-70588).
10.01(b)* 1995 Non-Qualified Stock Option Plan (Exhibit A to the
Company's Proxy Statement dated May 26, 1995 used in
connection with the Company's 1995 Annual Meeting of
Shareholders, File No. 1-9233)
10.02(a)* Agreement dated as of May 1, 1987 between the Company and
William Shaw (Exhibit 19.01 to Quarterly Report on Form 10-Q
for the quarter ended May 1, 1987, File No. 1-9232).
10.02(b)* Amendment dated January 3, 1989 to Agreement between the
Company and William Shaw (Exhibit 19.01(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
- 54 -
55
14 (a) (3). Exhibits--Continued
Exhibit Description
- ------- -----------
10.03(a)* Agreement dated as of May 1, 1987 between the Company and
Jerome Shaw (Exhibit 19.02 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).
10.03(b)* Amendment dated January 3, 1989 to Agreement between the
Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
10.04(a)* Agreement dated as of May 1, 1987 between the Company and
Irwin B. Robins (Exhibit 19.03 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 1, 1987, File
No. 1-9232).
10.04(b)* Amendment dated June 1, 1992 to Agreement between the Company
and Irwin B. Robins. (Exhibit 10.04(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30,
1992, File No. 1-9232).
10.04(c)* Amendment dated April 28, 1994 to Agreement between the
Company and Irwin B. Robins. (Exhibit 10.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended April 29,
1994, File No. 1-9232).
21.** Subsidiaries of the Registrant.
23.01** Consent of Ernst & Young LLP.
27.** Financial Data Schedule (filed with electronic version only).
_____________________________________________________
* Management contract or compensation plan or arrangement.
** Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.
- 55 -
56
14 (b). Reports on Form 8-K
The only Report on Form 8-K filed during the fourth quarter of the year ended
November 3, 1995 was a report dated October 5, 1995 (date of earliest event
reported), reporting Item 5. Other Events.
UNDERTAKING
The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities Exchange Act of 1934 and
the total amount of securities authorized under any such instruments does not
exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.
- 56 -
57
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VOLT INFORMATION SCIENCES, INC.
Dated: New York, New York
January 25, 1996 By: s/William Shaw
--------------
William Shaw
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
s/William Shaw Chairman of the Board, January 25, 1996
- ---------------------- President and Chief Executive
William Shaw Officer and Director
s/James J. Groberg Director, Senior Vice January 25, 1996
- ---------------------- President (Principal
James J. Groberg Financial Officer)
s/Jack Egan Vice President, Corporate January 25, 1996
- ---------------------- Accounting (Principal
Jack Egan Accounting Officer)
s/Jerome Shaw Director January 25, 1996
- ----------------------
Jerome Shaw
s/Irwin B. Robins Director January 25, 1996
- ----------------------
Irwin B. Robins
Director
- ----------------------
Mark N. Kaplan
Director
- ----------------------
John R. Torell, III
- 57 -
58
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
- -------- -------- -------------------------- -------- --------
Additions
--------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- --------- ---------- ---------
Year ended November 3, 1995:
Deducted from asset accounts:
Allowance for uncollectible accounts $4,027,000 $2,081,000 (1) $2,165,000 (3) $3,943,000
Unrealized loss (gain) on marketable securities 77,000 (198,000) (2) (121,000)
Year ended October 28, 1994:
Deducted from asset accounts:
Allowance for uncollectible accounts 3,960,000 1,903,000 (1) 1,836,000 (3) 4,027,000
Unrealized loss on marketable securities 77,000 (2) 77,000
Year ended October 29, 1993:
Deducted from asset accounts:
Allowance for uncollectible accounts 3,904,000 1,489,000 (1) 1,433,000 (3) 3,960,000
(1)--Includes a foreign currency translation loss of $5,000 in 1995, $46,000
in 1994 and a gain of $67,000 in 1993.
(2)--Charge (credit) to stockholders' equity.
(3)--Write-off of uncollectible accounts.
S-1
59
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
2.01 Asset Purchase and Sale Agreement entered October 6, 1993,
between the Company and Omnibus Funding Corporation, et. al.
(Exhibit 2.1 to the Company's Form 8-K, dated October 6, 1993,
File No. 1-9232).
2.02 Agreement and Plan of Merger dated as of October 5, 1995, as
amended on November 10, 1995 and December 7, 1995, among
Information International, Incorporated, Autologic, Inc., a
recently formed Delaware corporation, the name of which has
since been change to Autologic Information International, Inc.,
and Volt Information Sciences, Inc., Incorporated by Reference
to Appendix I to the Registration Statement on Form S-4 of
Autologic Information International, Inc., (File No. 33-99278).
3.01(a) Restated Certificate of Incorporation of the Company, as filed
with 3.01(a) the Department of State of New York on December
28, 1967 (Exhibit 3(a) to the Company's Registration Statement
on Form S-1, dated January 19, 1971, File No. 2-39320).
3.01(b) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on January 12, 1968 (Exhibit 3(b) to the
Company's Registration Statement on Form S-1, dated January 19,
1971, File No. 2-39320).
3.01(c) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on July 17, 1968 (Exhibit 3(c) to the
Company's Registration Statement on Form S-1, dated January 19,
1971, File No. 2-39320).
3.01(d) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on July 22, 1981 (Exhibit 4(a)(4) to the
Company's Registration Statements on Form S-16, dated July 30,
1981, File Nos. 2-73366 and 2-73367).
60
Exhibit Description
- ------- -----------
3.01(e) Certificate of Merger of Volt Information Sciences Capital
Corp. and VIS Capital Corp. into the Company, as filed with the
Department of State of New York on May 2, 1986 (Exhibit (d)(v)
to the Company's Registration Statement on Form 8-A, filed
August 7, 1986, File No. 1-9232).
3.01(f) Certificate of Amendment of the Restated Certificate of
Incorporation of the Company, as filed with the Department of
State of New York on June 13, 1988 (Exhibit 4.01 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
July 29, 1988).
3.02 By-Laws of the Company (Exhibit 4.02 to the Company's Quarterly
Report on Form 10-Q for the quarter ended July 29. 1988).
4.01(a) Form of Indenture, dated as of April 15, 1983 among the
Company, VIS Capital Corp. and BankAmerica Trust Company of New
York, as Trustee, including on pages 1-8 thereof, the full text
of the 12-3/8% Senior Subordinated Debentures and Guarantees
(Exhibit 4.01 to the Company's Registration Statement on Form
S-2, dated May 3, 1983, File No. 2-83260).
4.01(b) Form of Supplemental Indenture, dated as of May 2, 1986,
between the Company and BankAmerica Trust Company, as Trustee
(Exhibit (g)(ii) to the Company's Registration Statement on
Form 8-A, filed August 7, 1986, File No. 1-9232).
10.01(a)* Non-Qualified Stock Option Incentive Plan, as amended September
29, 1980 (Exhibit 10.12(b) to the Company's Registration
Statement on Form S-7, dated February 4, 1981, File No.
2-70588).
10.01(b)* 1995 Non-Qualified Stock Option Plan (Exhibit A to the
Company's Proxy Statement dated May 26, 1995 used in connection
with the Company's 1995 Annual Meeting of Shareholders, File
No. 1-9233)
10.02(a)* Agreement dated as of May 1, 1987 between the Company and
William Shaw (Exhibit 19.01 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).
61
Exhibit Description
- ------- -----------
10.02(b)* Agreement dated January 3, 1989 to Agreement between the
Company and William Shaw (Exhibit 19.01(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
10.03(a)* Amendment dated as of May 1, 1987 between the Company and
Jerome Shaw (Exhibit 19.02 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 1, 1987, File No. 1-9232).
10.03(b)* Amendment dated January 3, 1989 to Agreement between the
Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October
28, 1988, File No. 1-9232).
10.04(a)* Agreement dated as of May 1, 1987 between the Company and Irwin
B. Robins (Exhibit 19.03 to the Company's Quarterly Report on
Form 10- Q for the quarter ended May 1, 1987, File No. 1-9232).
10.04(b)* Amendment dated June 1, 1992 to Agreement between the Company
and Irwin B. Robins. (Exhibit 10.04(b) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30, 1992,
File No. 1-9232).
10.04(c)* Amendment dated April 28, 1994 to Agreement between the Company
and Irwin B. Robins. (Exhibit 10.01 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 29, 1994, File
No. 1-9232).
21.** Subsidiaries of the Registrant.
23.01** Consent of Ernst & Young LLP.
27.** Financial Data Schedule (filed with electronic version only).
_______________________________________________________
* Management contract or compensation plan or arrangement.
** Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.