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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For The Nine Months Ended August 3, 2003

Or

/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934


For the transition period from _________ to ___________



Commission File No. 1-9232


VOLT INFORMATION SCIENCES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)



New York 13-5658129
-------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)



560 Lexington Avenue, New York, New York 10022
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code: (212) 704-2400


Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)


Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes X No
----- -----

The number of shares of the Registrant's common stock, $.10 par
value, outstanding as of September 12, 2003 was 15,220,415.



1





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION


Item 1. Financial Statements

Condensed Consolidated Statements of Operations -
Nine Months and Three Months Ended August 3, 2003 and August 4, 2002 3

Condensed Consolidated Balance Sheets -
August 3, 2003 and November 3, 2002 4

Condensed Consolidated Statements of Cash Flows -
Nine Months Ended August 3, 2003 and August 4, 2002 5

Notes to Condensed Consolidated Financial Statements 7

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 16

Item 3. Qualitative and Quantitative Disclosures about Market Risk 33

Item 4. Controls and Procedures 34

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K 34


SIGNATURE 35



2





PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Nine Months Ended Three Months Ended
August 3, August 4, August 3, August 4,
2003 2002(a,b) 2003 2002(b)
----------- -------- ----------- -----------
(Dollars in thousands, except per share amounts)

NET SALES $1,171,099 $1,068,219 $415,158 $371,849

COST AND EXPENSES:
Cost of sales 1,099,798 1,009,008 384,774 345,014
Selling and administrative 53,179 52,428 19,457 17,547
Depreciation and amortization 17,753 16,640 6,117 5,888
----------- ---------- --------- -------
1,170,730 1,078,076 410,348 368,449
--------- --------- ------- -------

OPERATING PROFIT (LOSS) 369 (9,857) 4,810 3,400

OTHER INCOME (EXPENSE):
Interest income 615 610 135 204
Other expense, net--Notes A, B and E (2,418) (2,756) (947) (560)
Foreign exchange loss, net--Note J (274) (316) (184) (255)
Interest expense (1,678) (3,819) (480) (778)
--------- --------- ------ -------

(Loss) income from continuing operations before income taxes and
cumulative effect of a change in accounting (3,386) (16,138) 3,334 2,011
Income tax benefit (provision) 1,262 6,137 (1,223) (878)
------ -------- -------- -------
(Loss) income from continuing operations (2,124) (10,001) 2,111 1,133

Discontinued operations, net of taxes--Note H 4,310
Cumulative effect of a change in accounting--Note K:
Goodwill impairment (31,927)
------ ------- ------ ------

NET (LOSS) INCOME ($2,124) ($37,618) $2,111 $1,133
====== ======== ====== ======


Per Share Data
Basic and Diluted:
(Loss) income from continuing operations per share ($0.14) ($0.65) $0.14 $0.07
Gain from discontinued operations per share 0.28
Cumulative effect of a change in accounting per share (2.10)
------ ------ ----- -----
Net (loss) income per share ($0.14) ($2.47) $0.14 $0.07
====== ====== ===== =====

Weighted average number of shares-Basic-Note G 15,217 15,216 15,218 15,217
====== ====== ====== ======

Weighted average number of shares-Diluted-Note G 15,217 15,216 15,226 15,280
====== ====== ====== ======


(a) Pursuant to the Company's previously announced adoption of SFAS No. 145,
results for the nine months ended August 4, 2002 have been restated to give
effect to the reclassification of a charge of $2.1 million ($1.3 million,
net of taxes) arising from the March 2002 early payment of the Company's
7.92% Senior Notes to Other Expense, previously presented as an
extraordinary item.
(b) As previously announced, the Company has changed the method of reporting
the revenues of its Professional Employee Organization ("PEO") subsidiary
from gross billing to a net revenue basis. Accordingly, reported PEO
revenues and related cost of sales for the nine and three months ended
August 4, 2002 have been reduced and restated by $14.6 million and $4.8
million, respectively, with no effect on operating profit or the net
results of the Company.

See accompanying notes to condensed consolidated financial statements.



3





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

August 3, November 3,
2003 2002 (a)
----------- -----------
(Unaudited)
ASSETS (Dollars in thousands)

CURRENT ASSETS
Cash and cash equivalents, including restricted cash of $20,606 (2003) and
$11,458 (2002)--Note J $58,418 $43,620
Short-term investments 3,947 3,754
Trade accounts receivable less allowances of $10,012 (2003) and $10,994 (2002)--Note B 298,565 300,670
Inventories--Note C 32,840 29,690
Recoverable income taxes 8,043 6,552
Deferred income taxes 8,866 8,343
Prepaid expenses and other assets 16,369 15,212
-------- --------
TOTAL CURRENT ASSETS 427,048 407,841

Property, plant and equipment less allowances for depreciation and amortization of
$103,419 (2003) and $87,769 (2002)--Note E 84,757 89,294
Deposits and other assets 2,523 3,380
Intangible assets-net of accumulated amortization of $1,349 (2003) and $1,258 (2002)--Note K 8,983 9,075
-------- --------
TOTAL ASSETS $523,311 $509,590
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Note D $3,373 $2,424
Current portion of long-term debt--Note E 363 1,524
Accounts payable 153,640 154,054
Accrued wages and commissions 42,687 39,529
Accrued taxes other than income taxes 15,372 18,525
Other accruals 14,720 8,276
Customer advances and other liabilities 30,026 19,009
-------- --------
TOTAL CURRENT LIABILITIES 260,181 243,341

Long-term debt--Note E 14,193 14,469
Deferred income taxes 13,775 14,743

STOCKHOLDERS' EQUITY--Notes A, B, E and F
Preferred stock, par value $1.00; Authorized--500,000 shares; issued--none
Common stock, par value $.10; Authorized--30,000,000 shares; issued and
outstanding--15,220,415 shares 1,522 1,522
Paid-in capital 41,091 41,036
Retained earnings 192,838 194,962
Accumulated comprehensive loss (289) (483)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 235,162 237,037
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $523,311 $509,590
======== ========


(a) The Balance Sheet at November 3, 2002 has been derived from the audited
financial statements at that date.

See accompanying notes to condensed consolidated financial statements.

4




VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
--------------------------------
August 3, August 4,
2003 2002
---------- -----------
(In thousands)


CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net loss ($2,124) ($37,618)
Adjustments to reconcile net loss to cash provided by operating activities:
Discontinued operations (4,310)
Loss on early payment of debt 2,093
Cumulative effect of a change in accounting - goodwill impairment 31,927
Depreciation and amortization 17,753 16,640
Equity in net loss of joint venture (50)
Accounts receivable provisions 4,262 7,991
Loss on foreign currency translation 14 207
Deferred income tax (benefit) provision (1,703) 3,576
Loss on disposition of fixed assets 136 224
Other 2 3
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (11,807) 30,569
Proceeds from securitization of accounts receivable 10,000 50,000
(Increase) decrease in inventories (3,150) 2,314
Increase in prepaid expenses and other current assets (656) (5,622)
Decrease in other assets 820 1,080
(Decrease) increase in accounts payable (870) 31,427
Increase (decrease) in accrued expenses 6,448 (19,331)
Increase in customer advances and other liabilities 10,978 9,023
Net change in income taxes (1,375) (11,661)
------- --------

NET CASH PROVIDED BY OPERATING ACTIVITIES 28,728 108,482
------- --------




5




VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)--Continued



Nine Months Ended
--------------------------
August 3, August 4,
2003 2002
------------- -----------
(In thousands)

CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Sales of investments $651 $634
Purchases of investments (621) (882)
Proceeds from disposals of property, plant and equipment 271 719
Purchases of property, plant and equipment (13,486) (10,706)
Proceeds from sale of subsidiary 24,233
Other 20
------- -------
NET CASH (APPLIED TO) PROVIDED BY INVESTING ACTIVITIES (13,165) 13,998
-------- ------

CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Payment of long term-debt (1,437) (33,395)
Exercise of stock options 55 35
Increase (decrease) notes payable to banks 935 (61,760)
------- --------
NET CASH APPLIED TO FINANCING ACTIVITIES (447) (95,120)
------- --------

Effect of exchange rate changes on cash (318) (1,187)
-------- --------

NET INCREASE IN CASH AND CASH EQUIVALENTS 14,798 26,173

Cash and cash equivalents, including restricted cash, beginning of period 43,620 18,474
------ ------

CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED CASH END OF PERIOD $58,418 $44,647
======= =======

SUPPLEMENTAL INFORMATION Cash paid during the period:
Interest expense $1,737 $4,644
Income taxes, net of refunds $1,932 $4,520




See accompanying notes to condensed consolidated financial statements.



6




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note A--Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X and, therefore, do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
Company's consolidated financial position at August 3, 2003 and consolidated
results of operations for the nine and three months ended August 3, 2003 and
August 4, 2002 and consolidated cash flows for the nine months ended August 3,
2003 and August 4, 2002. Operating results for interim periods are not
necessarily indicative of the results that may be expected for the fiscal year.

Pursuant to the Company's previously announced adoption of Statement of
Financial Accounting Standards ("SFAS") No. 145, results for the nine months
ended August 4, 2002 have been restated to give effect to the reclassification
of a charge of $2.1 million ($1.3 million, net of taxes) arising from the March
2002 early payment of the Company's 7.92% Senior Notes to Other Expense,
previously presented as an extraordinary item (see Note E). In addition as
previously reported, the Company has changed the method of reporting the
revenues of its Professional Employee Organization ("PEO") subsidiary from gross
billing to a net revenue basis. Accordingly, reported PEO revenues and related
cost of sales for the nine and three months ended August 4, 2002 have been
reduced by $14.6 million and $4.8 million, respectively, with no effect on
operating profit or the net results of the Company.

The Company has elected to follow APB Opinion 25, "Accounting for Stock Issued
to Employees," to account for its Non-Qualified Stock Option Plan under which no
compensation cost is recognized because the option exercise price was equal to
at least the market price of the underlying stock on the date of grant. Had
compensation cost for these plans been determined at the grant dates for awards
under the alternative accounting method provided for in SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
Amendment of FASB Statement No. 123," net loss and loss per share, on a pro
forma basis, would have been:



Nine Months Ended Three Months Ended
------------------------- ------------------------
August 3, August 4, August 3, August 4,
2003 2002 2003 2002
--------- --------- --------- ---------
(Dollars in thousands, except per share amounts)


Net (loss) income as reported ($2,124) ($37,618) $2,111 $1,133
Pro forma compensation expense, net of taxes (148) (251) (51) (70)
--------- --------- --------- ---------
Pro forma net (loss) income ($2,272) ($37,869) $2,060 $1,063
========= ========= ========= =========

Pro forma net (loss) income per share-basic and diluted ($0.15) ($2.49) $0.14 $0.07
========= ========= ========= =========


The fair value of each option grant is estimated using the Multiple
Black-Scholes option pricing model, with the following weighted-average
assumptions used for grants in fiscal 2003 and 2002, respectively: risk-free
interest rates of 2.0% and 2.7%, respectively; expected volatility of .50 and
..52, respectively; an expected life of the options of five years; and no
dividends. The weighted average fair values of stock options granted during
fiscal years 2003 and 2002 were $5.93 and $10.59, respectively.




7



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note A--Basis of Presentation--Continued

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" to provide
new guidance with respect to the consolidation of all previously unconsolidated
entities, including special purpose entities. The Company has no unconsolidated
subsidiaries. However, the Company will continue to evaluate the impact of the
adoption of the interpretation on the Company's consolidated financial position
and results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," to amend and clarify financial
accounting and improve reporting for derivative instruments and for hedging
activities under FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003. The Company believes that the adoption of SFAS No.
149 will not have a material impact on the Company's consolidated financial
position or results of operations.

These statements should be read in conjunction with the financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the year
ended November 3, 2002. Except as discussed in this Report, the accounting
policies used in preparing these financial statements are the same as those
described in that Report. The Company's fiscal year ends on the Sunday nearest
October 31.


Note B--Securitization Program

Effective April 15, 2002, the Company entered into a $100.0 million, three-year
accounts receivable securitization program ("Securitization Program"). Under the
Securitization Program, receivables related to the United States operations of
the staffing solutions business of the Company and its subsidiaries are sold
from time-to-time by the Company to Volt Funding Corp., a wholly owned special
purpose subsidiary of the Company ("Volt Funding"). Volt Funding, in turn, sells
to Three Rivers Funding Corporation ("TRFCO"), an asset backed commercial paper
conduit sponsored by Mellon Bank, N.A. and unaffiliated with the Company, an
undivided percentage ownership interest in the pool of receivables Volt Funding
acquires from the Company (subject to a maximum purchase by TRFCO in the
aggregate of $100.0 million). The Company retains the servicing responsibility
for the accounts receivable. At August 3, 2003, TRFCO had purchased from Volt
Funding a participation interest of $70.0 million out of a pool of approximately
$176.8 million of receivables.

The Securitization Program is not an off-balance sheet arrangement, as Volt
Funding is a 100% owned consolidated subsidiary of the Company. Accounts
receivable are only reduced to reflect the fair value of receivables actually
sold. The Company entered into this arrangement as it provided a low-cost
alternative to other financing.

The Securitization Program is designed to enable receivables sold by the Company
to Volt Funding to constitute true sales of those receivables. As a result, the
receivables are available to satisfy Volt Funding's own obligations to its own
creditors before being available, through the Company's residual equity interest
in Volt Funding, to satisfy the Company's creditors (subject also, as described
in Note E, to the security interest that the Company has granted in the common
stock of Volt Funding in favor of the lenders under the Company's Credit
Facility). TRFCO has no recourse to the Company (beyond its interest in the pool
of receivables owned by Volt Funding) for any of the sold receivables.



8




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note B--Securitization Program--Continued

In the event of termination of the Securitization Program, new purchases of a
participation interest in receivables by TRFCO would cease and collections
reflecting TRFCO's interest would revert to it. The Company believes TRFCO's
aggregate collection amounts should not exceed the pro rata interests sold.
There are no contingent liabilities or commitments associated with the
Securitization Program.

The Company accounts for the securitization of accounts receivable in accordance
with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." At the time a participation interest in the
receivables is sold, the receivable representing that interest is removed from
the condensed consolidated balance sheet (no debt is recorded) and the proceeds
from the sale are reflected as cash provided by operating activities. Losses and
expenses associated with the transactions, primarily related to discounts on
TRFCO's commercial paper, are charged to the consolidated statement of
operations.

The Company incurred charges, related to the Securitization Program, of $1.2
million and $0.4 million in the nine and three months ended August 3, 2003,
respectively, compared to $0.4 million and $0.3 million in the nine and three
months ended August 4, 2002, which are included in Other Expense on the
condensed consolidated statement of operations. The equivalent cost of funds in
the Securitization Program was 2.6% and 3.0% per annum in the nine-month 2003
and 2002 fiscal periods, respectively. The Company's carrying retained interest
in the receivables approximated fair value due to the relatively short-term
nature of the receivable collection period. In addition, the Company performs
sensitivity analyses, changing various key assumptions, which also indicates the
retained interest in receivables approximated fair values.

At August 3, 2003 and November 3, 2002, the Company's carrying retained interest
in a revolving pool of receivables of approximately $176.8 million and $168.2
million, respectively, net of a service fee liability, was approximately $106.6
million and $108.1 million, respectively. The outstanding balance of the
undivided interest sold to TRFCO was $70.0 million and $60.0 million at August
3, 2003 and November 3, 2002, respectively. Accordingly, the trade accounts
receivable included on the August 3, 2003 and November 3, 2002 condensed
consolidated balance sheets have been reduced to reflect the $70.0 million and
$60.0 million participation interest sold, respectively.

The Securitization Program is subject to termination at TRFCO's option, under
certain circumstances, including the default rate, as defined, on receivables
exceeding a specified threshold, the rate of collections on receivables failing
to meet a specified threshold or the Company failing to maintain a long-term
debt rating of "B" or better, or the equivalent thereof from a nationally
recognized rating organization. The Company's most recent long-term debt rating
was "BBB-" with a neutral rating outlook.



9




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note C--Inventories

Inventories of accumulated unbilled costs and materials by segment are as
follows:


August 3, November 3,
2003 2002
-------------- ----------------
(In thousands)

Staffing Services $18 $32
Telephone Directory 11,921 11,355
Telecommunications Services 17,208 14,394
Computer Systems 3,693 3,909
-------- --------
Total $32,840 $29,690
======= =======



The cumulative amounts billed under service contracts at August 3, 2003 and
November 3, 2002 of $5.9 million and $2.1 million, respectively, are credited
against the related costs in inventory.


Note D--Short-Term Borrowings

At August 3, 2003, the Company had total outstanding bank borrowings of $3.4
million under credit lines with domestic and foreign banks that expire at
various times during fiscal 2003 unless renewed, and that provide for borrowings
and letters of credit up to an aggregate of $10.8 million. Borrowings in foreign
currencies provide a hedge against devaluation in foreign currency denominated
assets.


Note E--Long-Term Debt

Long-term debt consists of the following:


August 4, November 3,
2003 2002
------------ ----------------
(In thousands)

Term loan (a) $14,556 $14,810
Note payable (b) 1,183
------- -------
14,556 15,993
Less amounts due within one year 363 1,524
------- -------
Total long-term debt $14,193 $14,469
======= =======


(a) In September 2001, a subsidiary of the Company entered into a $15.1 million
loan agreement with General Electric Capital Business Asset Funding
Corporation. The 20-year loan, which bears interest at 8.2% per annum and
requires principal and interest payments of $0.4 million per quarter, is
secured by a deed of trust on land and buildings (carrying amount at August
3, 2003, $11.1 million). The obligation is guaranteed by the Company.

(b) On February 9, 1999, the Company entered into a $5.6 million installment
payment agreement to finance the purchase and support of an Enterprise
Resource Planning system for internal use as an accounting and back office
system, which has been capitalized and is being amortized over a five to
seven-year period. The agreement provided for interest, calculated at 6%,
and principal payments in five equal annual installments of $1.3 million,
which began in February 1999. The final payment was made in February 2003.



10




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note E--Long-Term Debt--Continued

During the fiscal 2002 first quarter, the Company decided to prepay the
remaining $30.0 million of its 7.92% Senior Notes in lieu of seeking amendments
to the agreements under which the Senior Notes were issued that would have been
required in order for the Company to implement the Securitization Program
discussed in Note B and that may have been required, depending upon the size of
the Company's then expected first quarter loss. The Company prepaid the Senior
Notes on March 5, 2002, which otherwise would have been due in installments over
the next two and one-half years. The "make whole" premium paid to the holders of
the Senior Notes of $2.1 million was recognized as Other Expense in the second
quarter of fiscal 2002 for the early payment of that debt.

Effective April 15, 2002, the Company entered into a $40.0 million, two-year,
secured, syndicated, revolving credit agreement ("Credit Agreement") which
established a credit facility ("Credit Facility") in favor of the Company and
designated subsidiaries, of which up to $15.0 million may be used for letters of
credit. Borrowings by subsidiaries are limited to $25.0 million in the
aggregate. The administrative agent arranger for the secured Credit Facility is
JP Morgan Chase Bank. The other banks participating in the Credit Facility are
Mellon Bank, NA, Wells Fargo, N. A. and Lloyds TSB Bank PLC. Borrowings and
letters of credit under the Credit Facility are limited to a specified borrowing
base, which is based upon the level of specified receivables, generally at the
end of the fiscal month preceding a borrowing. At August 3, 2003, the borrowing
base was approximately $33.8 million. Borrowings under the Credit Facility are
to bear interest at various rate options selected by the Company at the time of
each borrowing, certain of which rate options are based on a leverage ratio, as
defined, as is the facility fee. Additionally, interest and the facility fees
can be increased or decreased upon a change in the Company's long-term debt
rating provided by a nationally recognized rating agency. Based upon the
Company's leverage ratio and debt rating at August 3, 2003, if a three-month
LIBO rate was the interest rate option selected by the Company, borrowings would
have borne interest at the rate of 2.4% per annum. At August 3, 2003, the
facility fee was 0.4% per annum. The Company has not borrowed, and no letters of
credit have been issued, under the Credit Facility since its inception in April
2002.

The Credit Agreement provides for the maintenance of various financial ratios
and covenants, including, among other things, a requirement that the Company
maintain a consolidated tangible net worth, as defined, of $220.0 million (the
Company's consolidated tangible net worth, as defined, as of August 3, 2003 was
$227.4 million); a limitation on cash dividends and capital stock repurchases
and redemptions by the Company in any one fiscal year to 25% of consolidated net
income, as defined, for the prior fiscal year; and a requirement that the
Company maintain a ratio of EBIT, as defined, to interest expense, as defined,
of 1.25 to 1.0 for the twelve months ending as of the last day of each fiscal
quarter. As a result of the loss sustained by the Company in fiscal 2002, the
Company is currently restricted from paying dividends and making stock
repurchases and stock redemptions. The Credit Agreement also imposes limitations
on, among other things, the incurrence of additional indebtedness, the
incurrence of additional liens, sales of assets, the level of annual capital
expenditures, and the amount of investments, including business acquisitions and
investments in joint ventures and loans that may be made by the Company and its
subsidiaries. At August 3, 2003, the Company was in compliance with all
covenants in the Credit Agreement and believes it will be in compliance with all
covenants through fiscal 2003.

The Company is liable on all loans made to it and all letters of credit issued
at its request, and is jointly and severally liable as to loans made to
subsidiary borrowers. However, unless also a guarantor of loans, a subsidiary
borrower is not liable with respect to loans made to the Company or letters of
credit issued at the request of the Company, or with regard to loans made to any
other subsidiary borrower. Six subsidiaries of the Company are guarantors of all
loans made to the Company or to subsidiary borrowers under the Credit Facility.
At August 3,


11



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note E--Long-Term Debt--Continued

2003, four of those guarantors have pledged approximately $45.4 million of
accounts receivable, other than those in the Securitization Program, as
collateral security for their guarantee obligations. Under certain
circumstances, other subsidiaries of the Company also may be required to become
guarantors under the Credit Facility. The Company has pledged all of the stock
of Volt Funding (see Note B) as collateral security for the Company's
obligations under the Credit Facility.


Note F--Stockholders' Equity

Changes in the major components of stockholders' equity for the nine months
ended August 3, 2003 are as follows:



Common Paid-In Retained
Stock Capital Earnings
-------- ------------- ----------
(In thousands)

Balance at November 3, 2002 $1,522 $41,036 $194,962
Stock options exercised - 3,000 shares 55
Net loss for the nine months (2,124)
------ ------- --------

Balance at August 3, 2003 $1,522 $41,091 $192,838
====== ======= ========


Another component of stockholders' equity, the accumulated comprehensive loss,
consists of cumulative unrealized foreign currency translation losses, net of
taxes, of $349,000 and $490,000 at August 3, 2003 and November 3, 2002,
respectively, and an unrealized gain, net of taxes, of $60,000 and $7,000 in
marketable securities at August 3, 2003 and November 3, 2002, respectively.
Changes in these items, net of income taxes, are included in the calculation of
comprehensive loss as follows:



Nine Months Ended Three Months Ended
--------------------------------- ---------------------------------
August 3, August 4, August 3, August 4,
2003 2002 2003 2002
------------- --------------- --------------- --------------
(In thousands)


Net (loss) profit ($2,124) ($37,618) $2,111 $1,133
Foreign currency translation adjustments-net 141 27 39 (43)
Unrealized gain (loss) on marketable securities-net 53 2 46 (12)
------- -------- ------ ---------
Total comprehensive (loss) profit ($1,930) ($37,589) $2,196 $1,078
======= ======== ====== =========



Note G--Per Share Data

In calculating basic earnings per share, the dilutive effect of stock options
are excluded. Diluted earnings per share are computed on the basis of the
weighted average number of shares of common stock outstanding and the assumed
exercise of dilutive outstanding stock options based on the treasury stock
method.



12






NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note G--Per Share Data--Continued
Nine Months Ended Three Months Ended
--------------------------------- -------------------------------
August 3, August 4, August 3, August 4,
2003 2002 2003 2002
--------------- --------------- ------------- -----------

Denominator for basic earnings per share:
Weighted average number of shares 15,217 15,216 15,218 15,217

Effect of dilutive securities:
Employee stock options 8 63
------ ------ ------ ------

Denominator for diluted earnings per share:
Adjusted weighted average number of shares 15,217 15,216 15,226 15,280
====== ====== ====== ======


Options to purchase 549,829 and 189,002 shares of the Company's common stock
were outstanding at August 3, 2003 and August 4, 2002, respectively, but were
not included in the computation of diluted earnings per share in the three
months then ended because the option's exercise price was greater than the
average market price of the common shares.

Due to a pre-tax loss in the nine months ended August 3, 2003 and August 4,
2002, none of the options to purchase 582,329 and 570,045 shares, respectively,
of the Company's common stock were included in the computation of diluted
earnings per share for those periods because the effect would be antidilutive.

Note H--Sale and Acquisitions of Subsidiaries and Businesses

On November 30, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), that comprised the
Company's Electronic Publication and Typesetting segment, was acquired by Agfa
Corporation through a tender offer for all of Autologic's outstanding shares and
a subsequent merger. The Company received $24.2 million for its shares. The
Company's gain on the sale of $4.5 million, including a tax benefit of $1.7
million (resulting from a taxable loss versus a gain for financial purposes), is
reflected in the Company's first nine months of fiscal 2002. The results of
operations of Autologic have been classified as discontinued.

The following results related to Autologic are included (through the sale and
disposal date of November 30, 2001) in discontinued operations for the nine
months ended August 4, 2002:

Nine Months Ended
August 4, 2002
--------------------
(In thousands)

Revenue $3,296
======

Loss before taxes and minority interest ($488)
Income tax benefit 153
Minority interest 138
-------
Loss from operations (197)
-------

Gain on disposal before tax benefit 2,761
Income tax benefit 1,746
-------
Gain on disposal 4,507
-------

Gain from discontinued operations $4,310
======



13



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note I--Segment Disclosures

Financial data concerning the Company's sales and segment operating profit
(loss) by reportable operating segment for the nine and three months ended
August 3, 2003 and August 4, 2002, included on page 20 of this Report, is an
integral part of these condensed consolidated financial statements. During the
nine months ended August 3, 2003, consolidated assets increased by $13.7
million, primarily due to an increase in both restricted and unrestricted cash
and equivalents.


Note J--Derivative Financial Instruments, Hedging and Restricted Cash

The Company enters into derivative financial instruments only for hedging
purposes. All derivative financial instruments, such as interest rate swap
contracts, foreign currency options and exchange contracts, are recognized in
the consolidated financial statements at fair value regardless of the purpose or
intent for holding the instrument. Changes in the fair value of derivative
financial instruments are either recognized periodically in income or in
stockholders' equity as a component of other comprehensive income, depending on
whether the derivative financial instrument qualifies for hedge accounting, and
if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally,
changes in fair values of derivatives accounted for as fair value hedges are
recorded in income along with the portions of the changes in the fair values of
the hedged items that relate to the hedged risks. Changes in fair values of
derivatives accounted for as cash flow hedges, to the extent they are effective
as hedges, are recorded in other comprehensive income, net of deferred taxes. At
August 3, 2003, the Company had outstanding foreign currency option and forward
contracts in the aggregate notional amount equivalent to $7.8 million, which
approximated the Company's net investment in foreign operations and is accounted
for as a hedge under SFAS No. 52.

Included in cash and cash equivalents at August 3, 2003 and November 3, 2002 was
approximately $20.6 million and $11.5 million, respectively, that was restricted
to cover obligations that were reflected in accounts payable at that date. These
amounts primarily relate to certain contracts with customers in which the
Company manages the customers' alternative staffing requirements, including the
payment of associate vendors.


Note K--Goodwill

As of the beginning of fiscal 2002, the Company adopted SFAS No. 142, "Goodwill
and Other Intangible Assets." Under the new rules, goodwill and other
intangibles with indefinite lives are no longer amortized, but are subject to
testing, annually and whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable, using fair value methodology. The
Company engaged independent valuation firms to assist in the determination of
impairment which may have existed in the $39.8 million of goodwill recorded at
the beginning of fiscal 2002. The result of testing goodwill, upon adoption of
SFAS No. 142, resulted in a non-cash charge of $31.9 million, which is reported
under the caption "Cumulative Effect of a Change in Accounting" in fiscal 2002.
Using the same valuation methods employed by the independent valuation firms,
the Company completed its annual impairment tests on the remaining $9.0 million
of goodwill during the second quarter of fiscal 2003 and determined that its
fair value exceeded the carrying value.




14


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)--Continued

Note K--Goodwill--Continued

The fiscal 2002 impairment charge in the Staffing Services segment related to
the Company's European Technical Placement division and the Administrative and
Industrial division, which had been adversely affected by the economic declines
in Europe and the United States, respectively. Accordingly, an impairment charge
of $23.9 million (including $2.6 million, the total carrying amount of goodwill
for the Administrative and Industrial division as of November 5, 2001) was
recognized.

The fiscal 2002 impairment charge in the Company's Telephone Directory business
related to its independent telephone directory publishing division ($6.9
million) of that segment, and the Company's then owned 50% interest in the
westVista joint venture ($1.1 million), which also published independent
directories. Due to the fact that some of the directories purchased had not
performed as well as projected, an impairment charge of $8.0 million was
recognized.




15




ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Forward-Looking Statements Disclosure

This Report and other reports and statements issued by the Company and its
officers, from time-to-time, contain certain statements concerning the Company's
future plans, objectives, performance, intentions and expectations. Words such
as "may," "should," "could," "seek," "believe," "expect," "anticipate,"
"estimate," "project," "strategy," "intend," "likely," and similar expressions
are intended to identify forward-looking statements about the Company's future
plans, objectives, performance, intentions and expectations. Although the
Company believes that its assumptions are reasonable, these forward-looking
statements are subject to a number of known and unknown risks and uncertainties
that could cause the Company's actual results, performance and achievements to
differ materially from those described or implied in the forward-looking
statements. These risks and uncertainties include, but are not limited to:

- - general economic, competitive and other business conditions, including the
effects of weakened domestic and international economies
- - the uncertainty of the world political situation, including the possible
effects of military action and terrorism
- - continued financial strength of the Company's customers, some of which have
experienced layoffs, unfavorable financial results, investigations by
government agencies and lowered financial expectations for the near term
- - the degree and timing of obtaining new contracts and the rate of renewals
of existing contracts, as well as customers' degree of utilization of the
Company's services
- - material changes in demand from larger customers, including those with
which the Company has national contracts
- - the effect of litigation by temporary employees and government activity
regarding, temporary help companies and the customers with which they do
business
- - variations in the rate of unemployment and higher wages sought by temporary
workers in certain technical fields particularly characterized by labor
shortages, which could affect the Company's ability to meet its customers'
demands and the Company's profit margins
- - changes in customer attitudes toward the use of outsourcing and temporary
personnel
- - the adverse effect of customers and potential customers involving
manufacturing offshore, reducing their need for temporary workers
- - the need for the Company to diversify its available temporary personnel to
offer greater support to the service sector of the economy
- - the Company's ability to attract and retain certain classifications of
technologically qualified personnel for its own use, particularly in the
areas of research and development, implementation and upgrading of internal
systems
- - the Company's ability to meet competition in highly competitive markets
with minimal impact on margins
- - the Company's ability to achieve customer acceptance of its products and
systems in markets characterized by rapidly changing technology and
frequent new product introductions
- - the Company's ability to foresee changes and to identify, develop and
commercialize innovative and competitive products and systems in a timely
and cost effective manner
- - risks inherent in new product introductions, such as start-up delays, cost
overruns and uncertainty of customer acceptance
- - the timing of customer acceptances of systems
- - the Company's dependence on third parties for some product components
- - changes in laws, regulations and government policies, including increased
taxes which, because of economic and competitive conditions, may not be
able to be passed on to the customer
- - the degree and effects of inclement weather
- - the Company's ability to maintain a sufficient credit rating to enable it
to continue its securitization program


16




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Forward-Looking Statements Disclosure--Continued

- - the Company's ability to maintain its existing credit rating in order to
avoid any increase in the cost of financing and any increase in fees under
its revolving credit facility, as well as its ability to comply with the
financial and other covenants applicable under its credit facility and
other borrowing instruments

These and certain other factors are discussed in the Company's Annual Report on
Form 10-K for the fiscal year ended November 3, 2002 and, from time-to-time, in
the Company's other reports filed with the Securities and Exchange Commission.


Critical Accounting Policies

Management's discussion and analysis of its financial position and results of
operations are based upon the Company's condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires management to make estimates, judgments, assumptions and
valuations that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosures. Future reported results of operations could be
impacted if the Company's estimates, judgments, assumptions or valuations made
in earlier periods prove to be wrong. Management believes the critical
accounting policies and areas that require the most significant estimates,
judgments, assumptions or valuations used in the preparation of the Company's
financial statements are as follows:

Revenue Recognition - The Company recognizes revenue as services are rendered,
products are shipped, or directories are published. Within the Company's
operating segments, these services include the billing of labor, material and
directory assistance transactions as they are provided. In addition, the Company
may provide services under long-term contracts. Revenue and costs applicable to
long-term contracts, including those providing for software customization or
modification, are recognized under the completed contract method, upon customer
acceptance, in accordance with the AICPA Statement of Positions No. 81-1,
"Accounting for Performance of Construction-Type and Certain Production-Type
Contracts" and No. 97-2, "Software Revenue Recognition" and related
interpretations and amendments. The Company records provisions for estimated
losses on contracts when losses become evident. Accumulated unbilled costs on
contracts are carried in inventory at the lower of actual cost or estimated
realizable value.

On April 1, 2003, the Company issued a press release stating that it would
change the method of reporting the revenues of its Professional Employee
Organization ("PEO") subsidiary, Shaw & Shaw, Inc., which historically accounted
for approximately 2% of the Company's revenues, from gross billing to a net
revenue basis based on the PEO industry's interpretation of Emerging Issues Task
Force ("EITF") 99-19, "Reporting Revenue Gross as a Principal Versus Net as an
Agent." The change in reporting, which is reflected in all current and prior
periods, resulted in a reduction in both reported PEO revenues and related costs
of sales, with no effect on the Company's operating results.

Under certain other contracts with customers, the Company manages the customers'
alternative staffing requirements, including transactions between the customer
and other staffing vendors ("associate vendors"). When payments to associate
vendors are subject to receipt of the customers' payment to the Company and the
Company does not bear credit responsibility, the arrangements are considered
non-recourse against the Company and the revenue, other than management fees
payable to the Company, is excluded from sales.



17




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Critical Accounting Policies - Continued

Allowance for Uncollectable Accounts - The establishment of an allowance
requires the use of judgment and assumptions regarding potential losses on
receivable balances. Allowances for doubtful accounts receivable are maintained
based upon historical payment patterns, aging of accounts receivable and actual
write-off history. The Company believes that its allowances are adequate;
however, changes in the financial condition of customers could have an effect on
the allowance balance required and a related charge or credit to earnings.

Long-Lived Assets - As of the beginning of fiscal 2002, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets." Under these new rules, goodwill and other intangibles
with indefinite lives are no longer amortized, but are subject to annual testing
using fair value methodology. An impairment charge is recognized for the amount,
if any, by which the carrying value of an intangible asset exceeds its fair
value. The Company engaged independent valuation firms, which primarily used
comparable multiples of revenue and EBITDA and other valuation methods to assist
the Company in the determination of the fair value of the reporting units
measured. An impairment charge of $31.9 million was recognized for the amount by
which the carrying value of goodwill exceeded its implied fair value as of the
beginning of fiscal 2002. Using the same valuation methods employed by the
independent valuation firms, the Company completed its annual impairment tests
on the remaining $9.0 million of goodwill during the second quarter of fiscal
2003 and determined the fair value exceeded the carrying value. Intangible
assets with finite, measurable lives continue to be amortized over their
respective useful lives.

Property, plant and equipment is recorded at cost, and depreciation and
amortization are provided on the straight-line and accelerated methods at rates
calculated to depreciate the cost of the assets over their estimated lives.
Intangible assets, other than goodwill, and property, plant and equipment are
reviewed for impairment in accordance with SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Under SFAS No. 144, these assets
are tested for recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. The fair values of
the assets are based upon Company estimates of the discounted cash flows that
are expected to result from the use and eventual disposition of the assets or
that amount that would be realized from an immediate sale. An impairment charge
is recognized for the amount, if any, by which the carrying value of an asset
exceeds its fair value. No impairment charge was recognized in the first nine
months of fiscal 2003 as no events or circumstances indicated the existence of
impairment. Although the Company believes its estimates are appropriate, the
fair value measurements of the Company's long-lived assets could be affected by
using different estimates and assumptions in these valuation techniques.

Capitalized Software - The Company's software technology personnel are involved
in the development and acquisition of internal-use software to be used in its
Enterprise Resource Planning system and software used in its operating segments,
some of which are customer accessible. The Company accounts for the
capitalization of software in accordance with AICPA Statement of Position No.
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Subsequent to the preliminary project planning and approval
stage, all appropriate costs are capitalized until the point at which the
software is ready for its intended use. Subsequent to the software being used in
operations, the capitalized costs are transferred from costs-in-process to
completed property, plant and equipment, and are accounted for as such. All
post-implementation costs, such as maintenance, training and minor upgrades that
do not result in additional functionality, are expensed as incurred.


18



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Critical Accounting Policies - Continued

Securitization Program - The Company accounts for the securitization of accounts
receivables in accordance with SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." At the time a
participation interest in the receivables is sold, that interest is removed from
the condensed consolidated balance sheet. The outstanding balance of the
undivided interest sold to TRFCO was $70.0 million and $60.0 million at August
3, 2003 and November 3, 2002, respectively. Accordingly, the trade receivables
included on the August 3, 2003 balance sheets have been reduced to reflect the
$70.0 million and $60.0 million participation interest sold, respectively.




19




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Results of Operations

The information, which appears below, relates to current and prior periods, the
results of operations for which periods are not indicative of the results which
may be expected for any subsequent periods.



Nine Months Ended Three Months Ended
------------------------------ ------------------------------
August 3, August 4, August 3, August 4,
2003 2002 2003 2002
------------ --------------- ------------ -------------

Net Sales: (In thousands)
- ----------
Staffing Services
Traditional Staffing (a) $926,849 $835,069 $327,638 $292,062
Managed Services 767,437 488,273 266,584 214,352
---------- --------- --------- ---------
Total Gross Sales (a) 1,694,286 1,323,342 594,222 506,414
Less: Non-Recourse Managed Services (709,803) (438,729) (245,774) (194,301)
---------- -------- -------- --------
Net Staffing Services (a) 984,483 884,613 348,448 312,113
Telephone Directory 49,743 50,866 22,319 19,763
Telecommunications Services 80,226 84,910 24,736 24,307
Computer Systems 65,559 58,289 23,488 18,604
Elimination of inter-segment sales (8,912) (10,459) (3,833) (2,938)
----------- ---------- ---------- -----------

Total Net Sales (a) $1,171,099 $1,068,219 $415,158 $371,849
========== ========== ======== ========

Segment Operating Profit (Loss):
Staffing Services $8,577 $9,275 $5,043 $6,130
Telephone Directory 4,584 2,505 4,128 3,381
Telecommunications Services (1,947) (11,316) (894) (3,282)
Computer Systems 9,158 6,528 3,584 2,563
-------- -------- -------- --------
Total Segment Operating Profit 20,372 6,992 11,861 8,792

General corporate expenses (20,003) (16,849) (7,051) (5,392)
------- ------- ------ ------
Total Operating Profit (Loss) 369 (9,857) 4,810 3,400

Interest income and other expense (b) (1,803) (2,146) (812) (356)
Foreign exchange loss-net (274) (316) (184) (255)
Interest expense (1,678) (3,819) (480) (778)
------ ------ ------ ------

(Loss) Profit from Continuing
Operations Before Income Taxes ($3,386) ($16,138) $3,334 $2,011
======= ======== ====== ======



(a) As previously reported, the Company has changed the method of reporting the
revenues of its Professional Employee Organization ("PEO") subsidiary, of
the Staffing Services segment, from gross billing to a net billing basis.
Accordingly, reported PEO revenues and related cost of sales for the nine
and three months ended August 4, 2002 have been reduced by $14.6 million
and $4.8 million, respectively, with no effect on operating profit or the
net results of the Company.

(b) Pursuant to the Company's previously reported adoption of SFAS No. 145,
results for the nine months ended August 4, 2002 have been restated to give
effect to the reclassification of a charge of $2.1 million ($1.3 million,
net of taxes) arising from the March 2002 early payment of the Company's
$30 million 7.92% Senior Notes to Other Expense, previously presented as an
extraordinary item.


20



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

NINE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE NINE MONTHS ENDED AUGUST 4, 2002

Results of Operations - Summary

In the nine-month period of fiscal 2003, consolidated net sales increased by
$102.9 million, or 10%, to $1.2 billion, from the comparable period of the
previous year. The increase in fiscal 2003 net sales resulted primarily from an
increase in sales in the Staffing Services segment of $99.9 million and the
Computer Systems segment of $7.3 million, partially offset by decreases in the
Telecommunications Services segment of $4.7 million and $1.1 million in the
Telephone Directory segment.

The Company's nine-month fiscal 2003 loss from continuing operations before
income taxes was $3.4 million compared to a loss of $16.1 million in the
comparable period of the previous year. The increase in the operating profit of
the Company's segments accounted for $13.4 million of the $12.7 million
improvement in results, the offset being higher corporate general and
administrative expenses. The Company's operating segments reported an operating
profit of $20.4 million for the first nine months of fiscal 2003 compared to
$7.0 million in the comparable period of the previous year. Contributing to the
improvement was a $9.4 million decrease in operating loss sustained by the
Telecommunications Services segment and increases in operating profit reported
by the Computer Systems and Telephone Directory Services segments of $2.6
million and $2.1 million, respectively. In addition, results from continuing
operations for the nine months of fiscal 2002 included a $2.1 million charge,
reported as other expense, for the early payment of the remaining $30.0 million
outstanding Company's 7.92% Senior Notes.

The net loss for the nine months of fiscal 2003 was $2.1 million compared to a
net loss of $37.6 million in the comparable period of the previous year. The
consolidated results for the nine-month period of fiscal 2002 included a
non-cash charge of $31.9 million for impairment of goodwill and a $4.3 million
net gain from discontinued operations.

The operating results for the nine months of both fiscal periods were adversely
affected by economic conditions, particularly in the telecommunications and high
tech industries, which account for a significant portion of the Company's
revenues.

Several of the Company's large customers in these industries have implemented
widespread layoffs and, especially in the telecommunications industry, have
significantly reduced expenditures. These factors have adversely affected the
results of the Company's Staffing Services and Telecommunications Services
segments. To counteract these factors and strengthen the Company's future
results, the Company has continued its cost containment programs and reorganized
its Telecommunications Services segment, which have mitigated some of the
negative effects of the economy.


Results of Operations - By Segment

Staffing Services

Sales of the Staffing Services segment increased by $99.9 million, or 11%, to
$984.5 million in the nine-month period of fiscal 2003, while the segment
reported an operating profit of $8.6 million compared to $9.3 million in


21



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

NINE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE NINE MONTHS ENDED AUGUST 4, 2002--Continued

Results of Operations - By Segment--Continued

Staffing Services--Continued

the comparable period of the previous year. The sales increase was primarily
from traditional staffing in the Administrative and Industrial division and the
VMC Consulting and ProcureStaff businesses of the Technical Placement division.

The Administrative and Industrial division sustained a loss of $8.0 million on
sales of $366.6 million in the first nine months of fiscal 2003 compared to an
operating loss of $9.1 million on sales of $298.8 million in the comparable
period of the previous year. The decrease in operating loss was the result of
the sales increase, partially offset by a decrease in gross margin of 2.3
percentage points, due to higher taxes and workers compensation rates, increased
competition, electronic auctions and customers leveraging their buying power.

The Technical Placement division reported an operating profit of $16.5 million
on net sales of $617.9 million for the nine months of fiscal 2003 compared with
an operating profit of $18.4 million on net sales of $585.8 million in the
comparable period of the previous year. The 5% increase in net sales was
primarily due to increased VMC Consulting project management and consulting
revenue which increased 60% to $52.7 million in the nine months of fiscal 2003
from $32.9 million in the comparable period of the previous year. Gross billings
in the Technical Placement division increased 30% from $1.1 billion in the first
nine months of fiscal 2002 to $1.4 billion in the first nine months of fiscal
2003 due to new ProcureStaff accounts. However, substantially all of
ProcureStaff billings are deducted in arriving at net sales due to the use of
associate vendors who have contractually agreed to be paid only upon receipt of
the customers' payment to the Company. The decrease in operating profit for the
period was the result of higher overhead costs due to on-going development of
new products and the implementation of new ProcureStaff accounts. ProcureStaff
incurred an increased operating loss in the first nine months of fiscal 2003 due
to the higher costs. However, VMC Consulting reported a 64% increase in
operating profit to $7.4 million in the nine months of fiscal 2003 from $4.5
million in the comparable period of the previous year due to its increased
revenue. The Technical Placement division recently lost a managed service
contract, the effect of which will be in the fourth quarter of fiscal 2003.
Revenue and gross profit from this contract approximated 4% each of the
division's total revenue and gross profit in the nine months of fiscal 2003 and
the full year in fiscal 2002. The division can not determine the amount of
revenue and gross profit that will be replaced through existing or new customers
in the future.

While the segment is committed to continued cost controls designed to increase
profitability for fiscal 2003, a return to substantially higher profit levels is
likely to depend on the timing and strength of a general economic recovery and
more specifically, an increase towards previous usage levels of alternative
staffing by American industry. The Company expects that high unemployment and
the need for state and local governments to align their revenues with
expenditures will result in continued pressures on margins as jurisdictions
increase payroll and various other taxes. Although the markets for the segment's
services include a broad range of industries throughout the United States and
Europe, general economic difficulties in specific geographic areas or industrial
sectors have in the past, and could in the future, affect the profitability of
the segment.


22



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

NINE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE NINE MONTHS ENDED AUGUST 4, 2002--Continued

Results of Operations - By Segment--Continued

Telephone Directory

The Telephone Directory segment reported an operating profit of $4.6 million in
the nine month period of fiscal 2003 compared with an operating profit of $2.5
million in the comparable period of the previous year; however, its sales
decreased by $1.1 million, or 2%, to $49.7 million in the first nine months of
fiscal 2003. The decrease in sales was due to a $3.6 million decrease in
printing revenue of the Company's Uruguay operation due to the economic
instability in Uruguay and its neighboring countries and a $0.9 million decrease
in production revenue primarily due to the previously reported loss of a
contract with a telecommunications company, which terminated at the end of the
third quarter of fiscal 2003, partially offset by a $3.8 million increase in
independent directory and toll-free directory publishing sales. The improvement
in operating results was the result of a $4.5 million increase in sales in the
DataNational operation due to a change in the publication schedule of its
community directories, an 8% decrease in overhead costs throughout the segment,
primarily due to cost reductions and lower bad debt expense as a result of a
more stringent credit policy. Operating profit in the nine months of fiscal 2003
also included an $0.8 million fee due to the terminated contract. Historically,
the segment has produced most of its profits in the third and fourth quarters of
the fiscal year.

Telecommunications Services

The Telecommunications Services segment's sales decreased by $4.7 million, or
6%, to $80.2 million in the first nine months of fiscal 2003. Its operating loss
decreased by $9.4 million to a loss of $1.9 million in the first nine months of
fiscal 2003 from a loss of $11.3 million in the comparable period of the
previous year. The sales reduction was due to the decline in expenditures by
many of the companies in the segment's telecommunications customer base. The
decrease in operating loss was achieved by increased gross margins of 3.7
percentage points and a reduction of overhead costs by 24%. Overhead costs were
significantly reduced from the prior year's comparable period through cost
control initiatives and the reorganization of the segment's operations during
the last half of fiscal 2002.

Computer Systems

The Computer Systems segment's sales increased by $7.3 million, or 12%, to $65.6
million in the first nine months of fiscal 2003 and its operating profit
increased by $2.6 million, or 40%, to $9.2 million. The increase in revenue was
due to the continued expansion of the segment's ASP directory assistance
out-sourcing business, an increase in domestic project revenue and growth of IT
services provided by the segment's Maintech division, partially offset by a
reduction in European project revenue. The growth in operating profit from the
comparable period of the previous year was the result of the increase in sales,
an increase in gross margins of 2.6 percentage points and a slight reduction in
overhead expressed as a percentage of sales.


Results of Operations - Other

Other items, discussed on a consolidated basis, affecting the results of
operations for the nine-month periods were:


23




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

NINE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE NINE MONTHS ENDED AUGUST 4, 2002--Continued

Results of Operations - Other--Continued

Selling and administrative expenses increased by $0.8 million, or 1%, to $53.2
million in the first nine months of fiscal 2003 from the comparable period of
the previous year as a result of increased corporate general and administrative
expenses related to costs to meet the disaster recovery requirements of
redundancy and business continuity for corporate systems and communications
networks, partially offset by reduced expenses in the operating segments (see
discussion by segment above). Selling and administrative expenses, expressed as
a percentage of sales, were 4.5% in the nine-month period of fiscal 2003 and
4.9% in the comparable period of the previous year.

Depreciation and amortization increased by $1.1 million, or 7%, to $17.8 million
in the first nine months of fiscal 2003. The increase was attributable to an
increase in fixed assets over last year's comparable period.

Other Expense decreased by $0.4 million, or 12%, from $2.8 million in the first
nine months of fiscal 2002 to $2.4 million in the first nine months of fiscal
2003. The fiscal 2003 nine month expense is primarily the result of charges
related to the Company's Securitization Program, which began in April 2002 and
significantly reduced interest expense, as well as sundry expenses, while the
fiscal 2002 expense was primarily the result of a $2.1 million charge for the
early payment of the Company's remaining $30.0 million outstanding 7.92% Senior
Notes.

Interest expense decreased by $2.1 million, or 56%, to $1.7 million in the first
nine months of fiscal 2003. The decrease was the result of lower borrowings
under the Company's credit facilities and the early repayment of the remaining
$30.0 million of 7.92% Senior Notes in March 2002 in contemplation of the
lower-cost accounts receivable Securitization Program. The Securitization
Program, the costs of which are reflected in Other Expense (see above), also
eliminated higher cost borrowings under the revolving credit facility. The
Company also benefited from significantly lower borrowing levels and interest
rates in Uruguay.

The Company's effective tax benefit rate on its financial reporting pre-tax
losses was 37.3% in the first nine months of fiscal 2003 compared to an
effective tax rate benefit of 38.0% in comparable period of the previous year.
The decreased rate was attributable to higher 2003 foreign losses for which no
tax benefit was provided.

The consolidated results for the first quarter of fiscal 2002 also included a
net gain from discontinued operations of $4.3 million which was comprised of a
$4.5 million gain, including a tax benefit of $1.7 million, on the sale of the
Company's interest in the Company's former 59% owned publicly-owned subsidiary,
Autologic Information International, Inc., partially offset by a loss from its
operations through the November 30, 2001 disposal date of $0.2 million.

In accordance with SFAS No. 142, the Company performed the first of the required
impairment tests of goodwill and other intangible assets as of the beginning of
fiscal 2002. At that date, the Company's goodwill, related to prior
acquisitions, amounted to approximately $40.0 million. The Company's revaluation
under the new accounting rules was completed during the second quarter of 2002,
and a $31.9 million impairment write-down was taken, reflecting declines in the
market value of the acquisitions since they were purchased. The write-down was
reported as a Cumulative Effect of a Change in Accounting. Using the same
valuation methods employed by the independent valuation firms, the Company
completed its annual impairment tests on the remaining $9.0 million of goodwill
during the second quarter of fiscal 2003 and determined the fair value exceeded
the carrying value.


24




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

THREE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE THREE MONTHS ENDED AUGUST 4, 2002

Results of Operations - Summary

In the third quarter of fiscal 2003, consolidated net sales increased by $43.3
million, or 12%, to $415.2 million from the comparable quarter of the previous
year. The increase in fiscal 2003 net sales resulted primarily from a $36.3
million increase in sales in the Staffing Services segment, a $4.9 million
increase in the Computer Systems segment, a $2.6 million increase in the
Telephone Directory segment and a $0.4 million increase in the
Telecommunications Services segment.

The Company's third quarter fiscal 2003 income from continuing operations before
income taxes was $3.3 million, compared to $2.0 million in the comparable
quarter of the previous year. The Company's operating segments reported an
operating profit of $11.9 million in the third quarter of fiscal 2003 compared
to $8.8 million in the fiscal 2002 third quarter. The increase in segment
operating profit was primarily the result of a $2.4 million decrease in
operating loss reported by the Telecommunications Services segment; a $1.0
million increase in operating profit in the Computer Systems segment and a $0.8
million increase in operating profit in the Telephone Directory segment;
partially offset by a $1.1 million decrease in the Staffing Services segment's
operating profit.

The Company reported net income of $2.1 million in the third quarter of fiscal
2003 compared with $1.1 million in the comparable quarter of the pervious year.


Results of Operations - By Segment


Staffing Services

Sales of the Staffing Services segment increased by $36.3 million, or 12%, to
$348.4 million in the third quarter of fiscal 2003 while the segment reported an
operating profit of $5.0 million compared to $6.1 million in the comparable
quarter of the previous year. The sales increase was primarily from traditional
staffing in the Administrative and Industrial division and in the Technical
Placement division from the VMC Consulting, traditional staffing and
ProcureStaff businesses.

The Administrative and Industrial division sustained an operating loss of $2.0
million on net sales of $129.0 million in the third quarter of fiscal 2003
compared to an operating loss of $1.9 million on net sales of $111.9 million in
the comparable quarter of the previous year. The comparable operating loss,
despite the increased revenue, was the result of a decrease in gross margin of
2.3 percentage points, due to higher tax and workers compensation rates,
increased competition, electronic auctions and customers leveraging their buying
power to obtain lower prices, partially offset by a slight decrease in the
dollar amount of overhead.

The Technical Placement division reported an operating profit of $7.1 million on
net sales of $219.4 million for the third quarter of fiscal 2003 compared with
an operating profit of $8.0 million on net sales of $200.2


25



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

THREE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE THREE MONTHS ENDED AUGUST 4, 2002--Continued
-

Results of Operations - By Segment--Continued

Staffing Services--Continued

million in the comparable quarter of the previous year. The 10% increase in net
sales was primarily due to increases in VMC Consulting and the traditional
staffing businesses. VMC Consulting increased its net sales by $8.5 million to
$20.4 million, an increase of 72% over the comparable quarter of the previous
year. Gross billings in the Technical Placement division increased 19%, from
$419.3 million in the third quarter of fiscal 2002 to $500.6 million in the
third quarter of fiscal 2003, due to new ProcureStaff accounts. However,
substantially all of ProcureStaff billings are deducted in arriving at net
sales, due to the use of associate vendors who have contractually agreed to be
paid only upon receipt of the customers' payment to the Company. The decrease in
operating profit for the period was the result of a decrease in gross margin of
0.7 percentage points and higher overhead costs, due to on-going development of
new products and the implementation of new ProcureStaff accounts. ProcureStaff
incurred an operating loss in the third quarter of fiscal 2003, due to the
higher costs. However, VMC Consulting reported a 75% increase in operating
profit to $2.9 million in the third quarter of fiscal 2003 from $1.7 million in
the comparable quarter of the previous year due to its increased revenue.

Telephone Directory

The Telephone Directory segment's sales increased by $2.6 million, or 13%, to
$22.3 million in the fiscal 2003 third quarter and it reported an operating
profit of $4.1 million in the third quarter of fiscal 2003 compared with an
operating profit of $3.4 million in the comparable quarter of the previous year.
The increased operating profit was the result of the growth in sales, primarily
due to an increase in independent directory publishing sales due to a change in
the publishing schedule of its community directories; overhead costs, which
expressed as a percentage of sales decreased 4.3 percentage points; and an $0.8
million fee due to the previously announced termination of a contract. These
increases were partially offset by a decrease in gross margin of 1.6 percentage
points.

Telecommunications Services

The Telecommunications Services segment's sales increased by $0.4 million, or
2%, to $24.7 million in the third quarter of fiscal 2003, and reduced its
operating loss to $0.9 million from $3.3 million in the comparable quarter of
the previous year. The increase in sales was primarily attributable to a $1.6
million increase in the Business Systems division partially offset by reductions
in the Central Office and Construction and Engineering divisions. The
significant decrease in operating loss was the result of the increase in
revenue, a 3.3 percentage point increase in gross margin and a 16% decrease in
overhead costs.

Computer Systems

The Computer Systems segment's sales increased by $4.9 million, or 26%, to $23.5
million in the fiscal 2003 third quarter and its operating profit increased by
$1.0 million, or 40%, to $3.6 million. The increase in sales was due to the
expansion in sales in the segment's ASP directory assistance business of $2.0
million and project revenue of



26



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

THREE MONTHS ENDED AUGUST 3, 2003 COMPARED
TO THE THREE MONTHS ENDED AUGUST 4, 2002--Continued
-

Results of Operations - By Segment--Continued

Computer Systems--Continued

$1.2 million due to customer acceptance of systems in both the United States and
Europe, as well as an increase in IT services provided by the segment's Maintech
division. The growth in operating profit is the result of the increased sales
and higher gross margins, partially offset by an increase in overhead to support
the increased sales.


Results of Operations - Other

Other items, discussed on a consolidated basis, affecting the results of
operations for the three-month periods were:

Selling and administrative expenses increased by $1.9 million, or 11%, to $19.5
million in the third quarter of fiscal 2003 from the comparable quarter of the
previous year as a result of increased corporate general and administrative
expenses related to costs to meet the disaster recovery requirements of
redundancy and business continuity for corporate systems and communications
networks, partially offset by reduced expenses in the operating segments (see
discussion by segment above). Selling and administrative expenses, expressed as
a percentage of sales, were 4.7% in both the third quarters of fiscal 2003 and
fiscal 2002.

Depreciation and amortization increased by $0.2 million, or 4%, to $6.1 million
in the fiscal 2003 third quarter. The increase was attributable to increases in
fixed assets over last year's comparable quarter of the previous year.

Other Expense increased by $0.4 million, or 69%, to $0.9 million in the third
quarter of fiscal 2003. The increase was due to higher charges related to the
Company's Securitization Program, the absence in fiscal 2003 of the Company's
share of earnings of a joint venture, which was liquidated in August 2002, and
an increase in sundry expenses.

Interest expense decreased by $0.3 million, or 38%, to $0.5 million in the third
quarter of fiscal 2003. The decrease was the result of lower borrowings under
the Company's credit facilities and the early repayment of the remaining $30.0
million of 7.92% Senior Notes in March 2002 in contemplation of the lower cost
accounts receivable Securitization Program. The Securitization Program, the
costs of which are reflected in Other Expense (see above), also eliminated
higher cost borrowings under the revolving credit facility. The Company also
benefited from significantly lower borrowing levels in Uruguay.

The Company's effective tax rate on its financial reporting pre-tax income was
36.7% in the third quarter of fiscal 2003 compared to an effective tax rate
benefit of 43.7% in fiscal 2002. The decreased rate was attributable to general
business credits.



27



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Liquidity and Capital Resources

Cash and cash equivalents, including restricted cash held in escrow for
ProcureStaff and Viewtech clients of $20.6 million and $11.5 million at August
3, 2003 and November 3, 2002, respectively, increased by $14.8 million to $58.4
million in the nine months ended August 3, 2003. Unrestricted cash and cash
equivalents increased to $37.8 million at August 3, 2003 from $32.2 million at
November 3, 2002.

Operating activities provided $28.7 million of cash in the first nine months of
fiscal 2003 compared to $108.5 million in the first nine months of fiscal 2002.
However, the first nine months of fiscal 2002 operating activities included cash
from the initial proceeds under the Company's Securitization Program of $50.0
million, and cash generated by increases in the level of accounts payable of
$31.4 million, and decreases in the levels of accounts receivable of $30.6
million.

Operating activities in the first nine months of fiscal 2003, exclusive of
changes in operating assets and liabilities, produced $18.3 million of cash, as
the Company's net loss of $2.1 million included non-cash charges primarily for
depreciation and amortization of $17.8 million and accounts receivable
provisions of $4.3 million. In the first nine months of fiscal 2002, operating
activities, exclusive of changes in operating assets and liabilities, produced
$20.7 million of cash, as the Company's net loss of $37.6 million included
non-cash charges of $31.9 million for goodwill impairment, depreciation and
amortization of $16.6 million, accounts receivable provisions of $8.0 million,
deferred income tax provision of $3.6 million, and a $2.1 million charge for the
early payment of the Company's 7.92% Senior Notes, partially offset by income
from discontinued operations of $4.3 million.

Changes in operating assets and liabilities produced $10.4 million of cash in
the first nine months of fiscal 2003, principally due to cash provided by
increases in customer advances and other liabilities of $11.0 million and
proceeds from the Securitization Program of $10.0 million, partially offset by
$11.8 million increase in the level of accounts receivable. In the first nine
months of fiscal 2002, changes in operating assets and liabilities produced
$87.8 million of cash, net, principally due to the initial proceeds under the
new Securitization Program of $50.0 million, and cash provided by increases in
the levels of accounts payable of $31.4 million and decreases in the level of
accounts receivables of $30.6 million, partially offset by a $19.3 million
reduction in accrued expenses and a $11.7 million reduction in net income taxes.

The principal factor in the $13.2 million of cash applied to investing
activities for the first nine months of fiscal 2003 was expenditures of $13.5
million for property, plant and equipment. In the first nine months of fiscal
2002, the primary factor in the cash provided by investing activities was the
proceeds received from the sale of Autologic of $24.2 million, partially offset
by the expenditure of $10.7 million for property, plant and equipment.

Cash applied to financing activities in the first nine months of fiscal 2003
resulted from the $1.4 million payment of long-term debt, partially offset by a
$0.9 million increase in bank loans. Financing activities used $95.1 million in
the prior year's comparable period for the payment of $61.8 million in bank
loans and a $33.4 million payment of debt, including the early payment of the
$30.0 million outstanding of 7.92% Senior Notes.


Commitments

In fiscal 2000, the Company began development of a new web-enabled front-end
system designed to improve efficiency and connectivity in the recruiting,
assignment, customer maintenance and other functions in the branch


28



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Liquidity and Sources of Capital--Continued

offices of the Staffing Services segment. The total costs to develop and install
this system are currently anticipated to be approximately $12.0 million (reduced
from $16.0 million previously reported due to anticipated cost savings), of
which approximately $7.6 million has been incurred and capitalized to date. The
Company has no other material capital commitments.

There has been no material change through August 3, 2003 in the Company's
contractual cash obligations and other commercial commitments from that reported
in the Company's Annual Report on Form 10-K for the fiscal year ended November
3, 2002.


Off-Balance Sheet Financing

The Company has no off-balance sheet financing arrangements, as that term has
meaning in Item 303(a)(4) of Regulation S-K.


Credit Lines

At August 3, 2003, the Company had credit lines with domestic and foreign banks
that provide for borrowings and letters of credit up to an aggregate of $50.8
million, including a $40.0 million revolving credit facility (the "Credit
Facility") in favor of the Company and designated subsidiaries under a secured
syndicated revolving credit agreement (the "Credit Agreement").

The Credit Facility of $40.0 million, which is scheduled to expire in April
2004, includes a $15.0 million letter of credit sub-facility. Borrowings by
subsidiaries are limited to $25.0 million in the aggregate. The administrative
agent arranger for the secured Credit Facility is JP Morgan Chase Bank. The
other banks participating in the Credit Facility are Mellon Bank, NA, Wells
Fargo, NA and Lloyds TSB Bank, PLC. This two-year Credit Facility, along with a
three-year accounts receivable Securitization Program (see below), replaced the
Company's $115.5 million credit agreement which was due to expire in September
2002. Borrowings and letters of credit under the Credit Facility are limited to
a specified borrowing base, which is based upon the level of specified
receivables, generally at the end of the fiscal month preceding a borrowing. At
August 3, 2003, the borrowing base was approximately $33.8 million. Borrowings
under the Credit Facility are to bear interest at various options selected by
the Company at the time of each borrowing, certain of which rate options are
based on a leverage ratio, as defined, as is the facility fee. Additionally,
interest and the facility fees can be increased or decreased upon a change in
the Company's long-term debt rating provided by a nationally recognized rating
agency. Based upon the Company's leverage ratio and debt rating at August 3,
2003, if a three-month LIBO rate was the interest rate option selected by the
Company, borrowings would have borne interest at the rate of 2.4% per annum. At
August 3, 2003, the facility fee was 0.4% per annum. The Company has not
borrowed, and no letters of credit have been issued, under the Credit Facility
since its inception in April 2002.

The Credit Agreement provides for the maintenance of various financial ratios
and covenants, including, among other things, a requirement that the Company
maintain a consolidated tangible net worth, as defined, of $220.0 million (the
Company's consolidated tangible net worth, as defined, as of August 3, 2003 was
$227.4 million); a limitation on cash dividends and capital stock repurchases
and redemptions by the Company in any one fiscal


29




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Liquidity and Sources of Capital--Continued

year to 25% of consolidated net income, as defined, for the prior fiscal year;
and a requirement that the Company maintain a ratio of EBIT, as defined, to
interest expense, as defined, of 1.25 to 1.0 for the twelve months ending as of
the last day of each fiscal quarter. As a result of the loss sustained by the
Company in fiscal 2002, the Company is currently restricted from paying
dividends, and making stock repurchases and stock redemptions. The Credit
Agreement also imposes limitations on, among other things, the incurrence of
additional indebtedness, the incurrence of additional liens, sales of assets,
the level of annual capital expenditures and the amount of investments,
including business acquisitions and investments in joint ventures, and loans
that may be made by the Company and its subsidiaries. At August 3, 2003, the
Company was in compliance with all covenants in the Credit Agreement and
believes it will be in compliance with all covenants through fiscal 2003.

The Company is liable on all loans made to it and all letters of credit issued
at its request, and is jointly and severally liable as to loans made to
subsidiary borrowers. However, unless also a guarantor of loans, a subsidiary
borrower is not liable with respect to loans made to the Company or letters of
credit issued at the request of the Company, or with regard to loans made to any
other subsidiary borrower. Six subsidiaries of the Company are guarantors of all
loans made to the Company or to subsidiary borrowers under the Credit Facility.
At August 3, 2003, four of those guarantors have pledged approximately $45.4
million of accounts receivable, other than those in the Securitization Program
(discussed below), as collateral security for their guarantee obligations. Under
certain circumstances, other subsidiaries of the Company also may be required to
become guarantors under the Credit Facility. The Company has pledged all of the
stock of its Volt Funding Corp. subsidiary (discussed below) as collateral
security for its own obligations under the Credit Facility.


Securitization Program

Effective April 15, 2002, the Company entered into a $100.0 million three-year
accounts receivable securitization program ("Securitization Program"). Under the
Securitization Program, receivables related to the United States operations of
the staffing solutions business of the Company and its subsidiaries are sold
from time-to-time by the Company to Volt Funding Corp., a wholly owned special
purpose subsidiary of the Company ("Volt Funding"). Volt Funding, in turn, sells
to Three Rivers Funding Corporation ("TRFCO"), an asset backed commercial paper
conduit sponsored by Mellon Bank, N.A., an undivided percentage ownership
interest in the pool of receivables Volt Funding acquires from the Company
(subject to a maximum purchase by TRFCO in the aggregate of $100.0 million). The
Company retains the servicing responsibility for the accounts receivable. On
April 15, 2002, TRFCO initially purchased from Volt Funding a participation
interest of $50.0 million out of an initial pool of approximately $162.0 million
of receivables. Of the $50.0 million cash paid by Volt Funding to the Company,
$35.0 million was used to repay the entire outstanding principal balance under
the Company's former revolving credit facility. At May 14, 2003, TRFCO had
purchased from Volt Funding a participation interest of $70.0 million out of a
pool of approximately $176.8 million of receivables.

The Securitization Program is not an off-balance sheet arrangement as Volt
Funding is a 100% owned consolidated subsidiary of the Company, with accounts
receivable only reduced to reflect the fair value of receivables actually sold.
The Company entered into this arrangement as it provided a low-cost alternative
to other forms of financing.


30




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

Liquidity and Sources of Capital--Continued

The Securitization Program is designed to enable receivables sold by the Company
to Volt Funding to constitute true sales of those receivables. As a result, the
receivables are available to satisfy Volt Funding's own obligations to its own
creditors before being available, through the Company's residual equity interest
in Volt Funding, to satisfy the Company's creditors (subject also, as described
above, to the security interest that the Company has granted in the common stock
of Volt Funding in favor of the lenders under the Company's Credit Facility).
TRFCO has no recourse to the Company (beyond its interest in the pool of
receivables owned by Volt Funding) for any of the sold receivables.

In the event of termination of the Securitization Program, new purchases of a
participation interest in receivables by TRFCO would cease and collections
reflecting TRFCO's interest would revert to it. The Company believes TRFCO's
aggregate collection amounts should not exceed the pro rata interests sold.
There are no contingent liabilities or commitments associated with the
Securitization Program.

The Company accounts for the securitization of accounts receivable in accordance
with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." At the time a participation interest in the
receivables is sold, the receivable representing that interest is removed from
the consolidated balance sheet (no debt is recorded) and the proceeds from the
sale are reflected as cash provided by operating activities. Losses and expenses
associated with the transactions, primarily related to discounts on TRFCO's
commercial paper, are charged to the consolidated statement of operations.

The Securitization Program is subject to termination at TRFCO's option, under
certain circumstances, including, among other things, the default rate, as
defined, on receivables exceeding a specified threshold, the rate of collections
on receivables failing to meet a specified threshold, the Company failing to
maintain a long-term debt rating of "B" or better or the equivalent thereof from
a nationally recognized rating organization or a default occurring and
continuing on indebtedness for borrowed money of at least $5.0 million. The
Company's most recent long-term debt rating was "BBB-" with a neutral rating
outlook.


Summary

The Company believes that its current financial position, working capital,
future cash flows from operations, credit lines and accounts receivable
Securitization Program are sufficient to fund its presently contemplated
operations through the remainder of fiscal 2003 and satisfy its debt
obligations.


New Accounting Pronouncements to be Effective in Fiscal 2003

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of SFAS No. 13,
and Technical Corrections" ("SFAS No. 145"). SFAS No. 145 updates, clarifies and
simplifies existing accounting pronouncements, by rescinding SFAS No. 4, which
required all gains and losses from the extinguishment of debt to be aggregated
and, if material, classified as an extraordinary item, net of related income tax
effect. As a result, the criteria in Accounting Principles Board Opinion No. 30
will now be used to classify those gains and losses. Additionally, SFAS No. 145
also makes technical corrections to existing pronouncements. While those
corrections are not substantive in nature, in some instances, they may change
accounting practice. The provisions of SFAS No.


31




MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS--Continued

New Accounting Pronouncements to be Effective in Fiscal 2003 - Continued

145 that amend SFAS No. 13 were adopted by the Company in its consolidated
financial statements for the first quarter of fiscal 2003. The adoption of SFAS
No. 145 will not have a material impact on the Company's consolidated financial
position or results of operations, but required a reclassification of the
extraordinary item arising from the March 2002 early payment of the Company's
7.92% Senior Notes to Other Expense in the second quarter of fiscal 2003.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred and nullifies Emerging Issues Task Force No. 94-3. The Company's
adoption of SFAS No. 146 at the beginning of fiscal 2003 did not have a material
impact on the Company's consolidated financial position or results of
operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an Amendment to FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide new guidance concerning the transition when a company
changes from the intrinsic value method to the fair value method of accounting
for employee stock-based compensation cost. As amended by SFAS No. 148, SFAS No.
123 also requires additional disclosure regarding such cost in annual financial
statements and condensed interim financial statements. As required, certain
provisions of SFAS No. 148 were adopted by the Company in the condensed
consolidated financial statements for the second quarter of fiscal 2003 included
in this Report (see Note A of Notes to Condensed Consolidated Financial
Statements). The Company believes that the adoption of SFAS No. 148 will not
have a material impact on the Company's consolidated financial position or
results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" to provide new guidance with respect to the
consolidation of all previously unconsolidated entities, including special
purpose entities. The Company has no unconsolidated subsidiaries; however, the
Company continues to evaluate the impact of the adoption of the interpretation
on the Company's consolidated financial position and results of operations.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," to amend and clarify financial
accounting and improve reporting for derivative instruments and for hedging
activities under FASB Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003. The Company believes that the adoption of SFAS No.
149 will not have a material impact on the Company's consolidated financial
position or results of operations.





32



ITEM 3 - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to market risk exposure in the following areas:


Interest Rate Market Risk

The Company has cash and cash equivalents ($58.4 million at August 3, 2003) on
which interest income is earned at variable rates. At August 3, 2003, the
Company had short-term borrowings totaling $3.4 million under credit lines with
various domestic and foreign banks and also had sold a participation interest of
$70.0 million in accounts receivable under the Securitization Program. The
interest rates on investments and borrowings and the cost of the Securitization
Program, the latter of which is based, in part, on prevailing interest rates in
the commercial paper market, are variable and, therefore, interest income,
interest expense and the cost of the Securitization Program are affected by the
general level of U.S. and foreign interest rates. Increases in interest rates
would result in higher interest expense and higher securitization costs that
could be substantially offset by an increase in interest income, depending upon
the levels of cash and cash equivalents, borrowings and financing under the
Securitization Program. The Company's policy is to take actions that would
mitigate risk when appropriate and available.

The Company's long-term debt of $14.2 million at August 3, 2003 consists of
borrowings at fixed interest rate, and the Company's interest expense related to
these borrowings is not exposed to changes in interest rates in the near term.

Equity Price Risk

The Company holds short-term investments in mutual funds for the Company's
deferred compensation plan. At August 3, 2003, the total market value of these
investments was $3.9 million, all of which were being held for the benefit of
participants in a non-qualified deferred compensation plan with no risk to the
Company.

Foreign Exchange Market Risk

The Company has a number of overseas subsidiaries and is, therefore, subject to
exposure from the risk of currency fluctuations as the value of foreign
currencies fluctuate against the dollar, which may impact reported earnings. The
Company attempts to reduce these risks by utilizing foreign currency contracts
and borrowings to hedge the adverse impact on foreign currency net assets when
the value of the dollar strengthens against the related foreign currency. At
August 3, 2003, the Company had entered into foreign currency options and
forward contracts in the aggregate notional amount of $7.8 million, which
approximately offset the Company's exposure in foreign currencies at that date.
As a result, the Company does not believe that it is exposed to material foreign
exchange market risk.



33



ITEM 4 - CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's management,
including the Company's Principal Executive Officer and Principal Financial
Officer, the Company has evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934), as of the end of the period covered by this
quarterly report, that ensure that there are reasonable assurances that
information relating to the Company, which is required to be disclosed in this
report, is recorded, processed, summarized and reported, within required time
periods. Based on that evaluation, these officers concluded that, as of the date
of their evaluation, the Company's disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed in the Company's periodic filings under the Securities Exchange Act of
1934 is accumulated and communicated to our management, including those
officers, to allow timely decisions regarding required disclosure.

(b) Changes in Internal Control Over Financial Reporting

There were no significant changes in the Company's internal control over
financial reporting during the period covered by this quarterly report, nor were
there any significant deficiencies or material weaknesses in these controls
requiring corrective actions.


PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:




Exhibit Description
- ------- -----------------------------------------------------------------------------------------------------

15.01 Letter from Ernst & Young LLP regarding Independent Accountants' Review Report

15.02 Letter from Ernst & Young LLP regarding Rule 436(c) of the Securities Act of 1933

31.01 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01 Certification of Principal Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

32.02 Certification of Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002



(b) Reports on Form 8-K:

During the quarter ended August 3, 2003, the Company filed a Report on Form 8-K
dated June 12, 2003 (date of earliest event reported) reporting under Item 7,
Financial Statements and Exhibits and Item 9 Regulation FD Disclosure.



34




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

VOLT INFORMATION SCIENCES, INC.
(Registrant)



BY: /s/ JACK EGAN
------------------------------
Date: September 10, 2003 JACK EGAN
Vice President - Corporate Accounting
(Principal Accounting Officer)




35






EXHIBIT INDEX
-------------

Exhibit
Number Description
- ------- -----------

15.01 Letter from Ernst & Young LLP regarding Independent Accountants' Review Report

15.02 Letter from Ernst & Young LLP regarding Rule 436(c) of the Securities Act of 1933

31.01 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.02 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.01 Certification of Principal Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002

32.02 Certification of Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002




36




EXHIBIT 15.01


ERNST & YOUNG LLP 5 Times Square Phone 212-773-3000
New York, New York 10036


INDEPENDENT ACCOUNTANTS' REVIEW REPORT


To the Board of Directors
Volt Information Sciences, Inc.


We have reviewed the accompanying unaudited condensed consolidated balance sheet
of Volt Information Sciences, Inc. and subsidiaries as of August 3, 2003, and
the related unaudited condensed consolidated interim statements of operations
for the nine and three month periods ended August 3, 2003 and August 4, 2002,
and the unaudited condensed consolidated statements of cash flows for the nine
month periods ended August 3, 2003 and August 4, 2002. These financial
statements are the responsibility of the Company's management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying unaudited condensed consolidated interim financial
statements referred to above for them to be in conformity with accounting
principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Volt
Information Sciences, Inc. as of November 3, 2002, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended, not presented herein; and in our report dated December 18, 2002, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of November 3, 2002, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.



September 4, 2003








EXHIBIT 15.02

ERNST & YOUNG LLP 5 Times Square Phone 212-773-3000
New York, New York 10036


September 9, 2003


To the Board of Directors
Volt Information Sciences, Inc.


We are aware of the incorporation by reference in Registration Statement No.
333-13369 on Form S-8 dated October 3, 1996, Registration Statement No.
333-45903 on Form S-8 dated February 9, 1998 and Registration Statement No.
333-106245 on Form S-8 dated June 18, 2003 of Volt Information Sciences, Inc. of
our report dated September 4, 2003, relating to the unaudited condensed
consolidated interim financial statements of Volt Information Sciences, Inc.
which are included in its Form 10-Q for the quarter ended August 3, 2003.

Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not part of
the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.



New York, New York









EXHIBIT 31.01

CERTIFICATION BY PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William Shaw, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Volt Information
Sciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15e) for the registrant and we
have:

a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

c) disclosed in this report any changes in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.


September 10, 2003 /s/William Shaw
--------------------------
William Shaw
Chairman of the Board,
President and Principal
Executive Officer




EXHIBIT 31.02


CERTIFICATION BY PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James J. Groberg, certify that:

1. I have reviewed this report on Form 10-Q of Volt Information Sciences,
Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15e) for the registrant and we
have:

a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

c) disclosed in this report any changes in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.


September 10, 2003 /s/James J. Groberg
-------------------------------
James J. Groberg
Senior Vice President and
Principal Financial Officer





EXHIBIT 32.01


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




In connection with the Quarterly Report of Volt Information Sciences, Inc. (the
"Company") on Form 10-Q for the period ending August 3, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, William
Shaw, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.

September 10, 2003

/s/ William Shaw
--------------------------
William Shaw
Principal Executive Officer



A signed original of this written statement required by Section 906 has been
provided to Volt Information Sciences, Inc. and will be retained by Volt
Information Sciences, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.





EXHIBIT 32.02


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002




In connection with the Quarterly Report of Volt Information Sciences, Inc. (the
"Company") on Form 10-Q for the period ending August 3, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, James
J. Groberg, Principal Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and (2) The information contained in the
report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

September 10, 2003

/s/ James J. Groberg
---------------------------
James J. Groberg
Principal Financial Officer





A signed original of this written statement required by Section 906 has been
provided to Volt Information Sciences, Inc. and will be retained by Volt
Information Sciences, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.