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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
(Mark One)

/ X / Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended November 2, 2003
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _________________ to _________________

Commission File Number: 1-9232

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


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

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Common Stock, $.10 par value New York Stock Exchange, Inc.


Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

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

The aggregate market value of the common stock held by non-affiliates of the
Registrant was approximately $99 million, based on the closing price of $13.23
per share on the New York Stock Exchange on May 4, 2003 (the last day of the
Registrant's fiscal second quarter). Shares of common stock held beneficially by
executive officers and directors and their spouses and the Registrant's Savings
Plan, have been excluded, without conceding that all such persons or plans are
"affiliates" of the Registrant).

The number of shares of common stock outstanding as of January 16, 2004 was
15,222,675.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company's Proxy Statement for its 2004 Annual Meeting are
incorporated by reference into Part III of this Report.






TABLE OF CONTENTS


Page
----

PART I

Item 1. Business 2
Item 2. Properties 25
Item 3. Legal Proceedings 26
Item 4. Submission of Matters to a Vote of Security Holders 26

PART II

Item 5. Market for Registrant's Common Stock, Related Stockholder
Matters and Insider Purchases of Equity Securities 28
Item 6. Selected Financial Data 29
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 31
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 51
Item 8. Financial Statements and Supplementary Data 54
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 84
Item 9A. Controls and Procedures 84

PART III

Item 10. Directors and Executive Officers of the Registrant 84
Item 11. Executive Compensation 84
Item 12. Security Ownership of Certain Beneficial
Owners and Management 84
Item 13. Certain Relationships and Related Transactions 84
Item 14. Principal Accountant Fees and Services 84

PART IV

Item 15. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 85



1


PART I
ITEM 1. BUSINESS

General
- -------

Volt Information Sciences, Inc. is a New York corporation, incorporated in 1957.
We sometimes refer to Volt Information Sciences, Inc. and its subsidiaries
collectively as "Volt" or the "Company," unless the context otherwise requires.
Volt operates in the following two businesses and, since Volt's
Telecommunications and Information Solutions business contains three segments,
Volt has four operating segments:

o Staffing Services
-----------------

(1) Staffing Services - This segment provides a broad range of employee
staffing services to a wide range of customers throughout the United
States, Canada and Europe. These services fall within three major
functional areas:

o Staffing Solutions - provides a full spectrum of managed staffing,
temporary/alternative personnel employment and direct hire placement
and professional employer organization services.

o Information Technology Solutions - provides a wide range of
information technology services including consulting, outsourcing,
turnkey project management and software and web development.

o E-Procurement Solutions - provides global vendor neutral procurement
and management solutions for supplemental staffing using web-based
software systems.

o Telecommunications and Information Solutions
--------------------------------------------

(2) Telephone Directory - This segment publishes independent telephone
directories in the United States and publishes telephone directories in
Uruguay under a contract with the government-owned telephone company;
provides telephone directory production, commercial printing, database
management, sales and marketing services; licenses directory production and
contract management software systems to directory publishers and others;
and provides services, principally computer-based projects, to public
utilities and financial institutions.

(3) Telecommunications Services - This segment provides telecommunications
services, including design, engineering, construction, installation,
maintenance and removals in the outside plant and central offices of
telecommunications and cable companies and within their customers'
premises, as well as for large commercial and governmental entities
requiring telecommunications services; and also provides complete turnkey
services for wireless and wireline telecommunications companies.

(4) Computer Systems - This segment provides directory assistance services,
both traditional and enhanced, to wireline and wireless telecommunications
companies; provides directory assistance content; designs, develops,
integrates, markets, sells and maintains computer-based directory
assistance systems and other database management and telecommunications
systems, primarily for the telecommunications industry; and provides IT
services to the Company's other businesses and to third parties.


2


Information as to Operating Segments
- ------------------------------------

The following tables set forth the contribution of each operating segment to the
Company's consolidated sales and operating profit for each of the three fiscal
years in the period ended November 2, 2003, and those assets identifiable within
each segment at the end of each of those fiscal years. This information should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements in
Items 7 and 8, respectively, of this Report.




November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)

NET SALES
Staffing Services:
Traditional Staffing--Note 1 $1,266,875 $1,141,717 $1,251,282
Managed Services 1,043,572 745,667 737,417
---------- ---------- ----------
Total gross sales 2,310,447 1,887,384 1,988,699
Less Non-recourse Managed Services--Note 2 (967,379) (679,110) (503,027)
Intersegment sales 2,367 2,044 12,169
---------- ---------- ----------
1,345,435 1,210,318 1,497,841
---------- ---------- ----------
Telephone Directory:
Sales to unaffiliated customers 70,116 83,212 99,682
Intersegment sales 43 114 264
---------- ---------- ----------
70,159 83,326 99,946
---------- ---------- ----------
Telecommunications Services:
Sales to unaffiliated customers 112,201 104,039 246,892
Intersegment sales 638 4,833 2,040
---------- ---------- ----------
112,839 108,872 248,932
---------- ---------- ----------
Computer Systems:
Sales to unaffiliated customers 84,472 72,261 66,435
Intersegment sales 9,167 6,535 4,863
---------- ---------- ----------
93,639 78,796 71,298
---------- ---------- ----------

Elimination of intersegment sales (12,215) (13,526) (19,336)
---------- ---------- ----------
TOTAL NET SALES $1,609,857 $1,467,786 $1,898,681
========== ========== ==========
SEGMENT PROFIT (LOSS)
Staffing Services $21,072 $20,469 $16,558
Telephone Directory 7,674 6,712 2,238
Telecommunications Services (3,986) (13,259) 7,353
Computer Systems 14,679 8,912 10,739
---------- ---------- ----------
Total segment profit 39,439 22,834 36,888

General corporate expenses (27,668) (22,704) (24,416)
---------- ---------- ----------
TOTAL OPERATING PROFIT 11,771 130 12,472

Interest and other (loss) income--Note 3 (1,953) (2,611) 859
Gain on securities-net 5,552
Gain on sale of partnership interest 4,173
Interest expense (2,070) (4,549) (11,880)
Foreign exchange gain (loss) 299 (477) (158)
---------- ---------- ----------
Income (loss) from continuing operations before
income taxes $8,047 ($7,507) $11,018
========== ========== ==========


3





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
OPERATING SEGMENT DATA--Continued
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)

IDENTIFIABLE ASSETS
Staffing Services $350,796 $332,482 $319,659
Telephone Directory 60,152 60,105 75,886
Telecommunications Services 49,053 46,666 87,723
Computer Systems 39,006 31,860 35,039
-------- -------- --------
499,007 471,113 518,307
Assets held for sale--Note 4 47,635
Cash, investments and other corporate assets 39,686 38,477 71,294
-------- -------- --------
Total assets $538,693 $509,590 $637,236
======== ======== ========


Note 1 As previously announced, the Company has changed the method of
reporting revenues of its Professional Employer Organization ("PEO")
subsidiary, Shaw & Shaw, from gross billing to a net revenue basis in
fiscal 2003. Accordingly, reported PEO revenues and related cost of
sales for fiscal years 2002 and 2001 have been reduced by $20.1
million and $33.6 million, respectively, with no effect on operating
profit or the net results to the Company.

Note 2 Under certain 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, the arrangements are considered
non-recourse against the Company and revenue, other than management
fees to the Company, is excluded from sales.

Note 3 Pursuant to the Company's previously announced adoption of SFAS
No.145, results for fiscal year 2002 have been restated to give effect
to the reclassification of a charge of $2.1 million arising from the
March 2002 early payment of the Company's 7.92% senior notes to other
expense, previously presented as an extraordinary item.

Note 4 On November 30, 2001, the Company's 59% owned publicly-held
subsidiary, Autologic Information International, Inc. ("Autologic"),
which was the Company's former 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 statement
purposes), was reflected in fiscal 2002. The results of operations of
Autologic have been classified as discontinued, Autologic's prior
period results have been reclassified and its assets have been
included as Assets held for sale, on a separate line item in the
Company's fiscal 2001 balance sheet.

4


Forward-Looking Statements
- --------------------------

This report and other reports and statements issued by the Company and its
officers from time to time contain certain "forward-looking statements." Words
such as "may," "should," "could," "seek," "believe," "expect," "anticipate,"
"estimate," "project," "intend," "strategy," "likely," and similar expressions
are intended to identify forward-looking statements about the Company's future
plans, objectives, performance, intentions and expectations. These
forward-looking statements are subject to a number of known and unknown risks
and uncertainties including, but are not limited to, those set forth below under
"Factors That May Affect Future Results," as well as the following:

o 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;

o the adverse effect of customers and potential customers moving
manufacturing and servicing operations off-shore, reducing their need for
temporary workers;

o the ability of the Company to diversify its available temporary personnel
to offer greater support to the service sector of the economy;

o changes in customers' attitudes toward the use of outsourcing and temporary
personnel;

o intense price competition and pressure on margins;

o the Company's ability to meet competition in its highly competitive markets
with minimal impact on margins;

o the Company's ability to foresee changes and to identify, develop and
commercialize innovative and competitive products and systems in a timely
and cost effective manner;

o the Company's ability to achieve customer acceptance of its products and
systems in markets characterized by rapidly changing technology and
frequent new product introductions;

o risks inherent in new product introductions, such as start-up delays, cost
overruns and uncertainty of customer acceptance;

o the timing of customer acceptances of systems;

o the Company's dependence on third parties for some product components;

o the degree and effects of inclement weather; and

o the Company's ability to maintain a sufficient credit rating to enable it
to continue its securitization program and ability to maintain its existing
credit rating in order to avoid any increase in interest rates and any
increase in fees under its revolving credit facility, as well as to comply
with the financial and other covenants applicable under its credit facility
and other borrowing instruments.


5


Such risks and uncertainties could cause the Company's actual results,
performance and achievements to differ materially from those described in or
implied by the forward-looking statements. Accordingly, readers should not place
undue reliance on any forward-looking statements made by or on behalf of the
Company. The Company does not assume any obligation to update any
forward-looking statements after the date they are made.

Factors That May Affect Future Results

The Company's business is dependent upon general economic, competitive and other
business conditions including the effects of weakened United States and European
economies.

The demand for the Company's services in all segments is dependent upon economic
conditions. Accordingly, the Company's business tends to suffer during economic
downturns. The Company's business is dependent upon the continued financial
strength of its customers. Certain of the Company's customers have announced
layoffs, unfavorable financial results, investigations by government agencies
and lowered financial expectations for the near term. Customers that experience
any of these events are less likely to use the Company's services.

In the staffing services segment, a weakened economy results in decreased demand
for temporary and permanent personnel. As economic activity slows down, many of
the Company's customers reduce their use of temporary employees before they
reduce the number of their regular employees. There is less need for contingent
workers in all potential customers, who are less inclined to add to their costs.
Since employees are reluctant to risk changing employers, there are fewer
openings and reduced activity in permanent placements as well. The segment has
also experienced margin erosion caused by increased competition, electronic
auctions and customers leveraging their buying power by consolidating the number
of vendors with whom they deal. Customer use of the Company's telecommunications
services is similarly affected in that some of the Company's customers reduce
their use of outside services in order to provide work to their in-house
departments and, in the aggregate, because of the current downturn in the
telecommunications industry and continued over capacity, there is less available
work. The continued delay in telecommunications companies' capital expenditure
projects during the current economic climate has significantly reduced the
segment's revenue, particularly from long-haul fiber optic projects and
cross-connect box projects, and little improvement can be expected until the
industry begins to increase its capital expenditures.

Additionally, 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, could adversely affect the Company's businesses.

Many of the Company's contracts either provide no minimum purchase requirements
or are cancelable during the term.

In all segments, the Company's contracts, even those master service contracts
whose duration spans a number of years, provide no assurance of any minimum
amount of work that will actually be available under any contract. In addition,
many of this segment's long-term contracts contain cancellation provisions under
which the customer can cancel the contract, even if the segment is not in
default under the contract. Therefore, these contracts do not give the
assurances that long-term contracts typically provide.


6


The Company's staffing services business subjects it to employment-related
claims.

The Company's staffing services business employs individuals on a temporary
basis and places them in a customer's workplace. The Company's ability to
control the workplace is limited, and the Company risks incurring liability to
its employees for injury or other harm that they suffer at the customer's
workplace. Although the Company has not historically suffered materially for
such harm suffered by its employees, there can be no assurance that future
claims will not materially adversely affect the Company.

Additionally, the Company risks liability to its customers for the actions of
the Company's temporary employees that result in harm to the Company's
customers. Such actions may be the result of negligence or misconduct on the
part of the Company's employees.

The Company may incur fines or other losses and negative publicity with respect
to any litigation in which it becomes involved. Although the Company maintains
insurance for many such actions, there can be no assurance that its insurance
will cover future actions or that the Company will continue to be able to obtain
such insurance on acceptable terms, if at all.

New and increased government regulation could have a material adverse effect on
the Company's business.

The Company's businesses are subject to licensing in many states and licensing
and regulation in certain foreign jurisdictions. Although the Company has not
had any difficulty complying with these requirements in the past, there can be
no assurance that the Company will continue to be able to do so, or that the
cost of compliance will not become material. Additionally, the jurisdictions in
which we do or intend to do business may:

o create new or additional regulations that prohibit or restrict the types of
services that we currently provide;

o impose new or additional employee benefit requirements, thereby increasing
costs that could adversely impact the Company's ability to conduct its
business ;

o require the Company to obtain additional licenses to provide its services;
or

o increase taxes or enact new or different taxes payable by the providers of
services such as those offered by the Company, some of which may not be
able to be passed on to customers.

The Company is dependent upon its ability to attract and retain certain
technologically qualified personnel.

The Company's future success is dependent upon its 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, as well as in its staffing services segment. The
availability of such personnel is dependent upon a number of economic and
demographic conditions. The Company may in the future find it difficult to hire
such personnel in the face of competition from other companies in different
industries who are capable of offering higher compensation.


7


All of the industries in which the Company does business are very competitive,
which could adversely affect the results of those businesses.

The Company operates in very competitive industries with, in most cases, limited
barriers to entry. Some of the Company's principal competitors are larger and
have substantially greater financial resources than Volt. Accordingly, these
competitors may be better able than Volt to attract and retain qualified
personnel and may be able to offer their customers more favorable pricing terms
than the Company. In many businesses, small competitors can offer similar
services at lower prices because of lower overheads. In addition to these
general statements, the following information applies to the specific segments
identified.

The Company's staffing services segment is in a very competitive industry with
limited barriers to entry. There are many temporary service firms in the United
States and Europe, many with only one or a few offices that service only a small
market. On the other hand, some of this segment's principal competitors are
larger and have substantially greater financial resources than Volt and service
the national accounts whose business the Company solicits. Accordingly, these
competitors may be better able than Volt to attract and retain qualified
personnel and may be able to offer their customers more favorable pricing terms
than the Company. Furthermore, all of the staffing industry is subject to the
fact that contingent workers are provided to customers and most customers are
more protective of their full time workforce than contingent workers.

The results of the Company's computer systems segment are highly dependent on
the volume of directory assistance calls to VoltDelta's customers which are
routed to the segment under existing contracts, the segment's ability to
continue to secure comprehensive listings from others, its ability to obtain
additional customers for these services and on its continued ability to sell
products and services to new and existing customers. This segment's position in
its market depends largely upon its reputation, quality of service and ability
to develop, maintain and implement information systems on a cost competitive
basis. Although Volt continues its investment in research and development, there
is no assurance that this segment's present or future products will be
competitive, that the segment will continue to develop new products or that
present products or new products can be successfully marketed.

The Company's telecommunications services segment faces substantial competition
with respect to all of its telecommunications services from other suppliers and
from in-house capabilities of present and potential customers. Since many of our
customers provide the same type of services as the segment, the segment faces
competition from its own customers and potential customers as well as from third
parties. Some of this segment's significant competitors are larger and have
substantially greater financial resources than Volt. There are relatively few
significant barriers to entry into certain of the markets in which the segment
operates, and many competitors are small, local companies that generally have
lower overhead. Volt's ability to compete in this segment depends upon its
reputation, technical capabilities, pricing, quality of service and ability to
meet customer requirements in a timely manner. Volt believes that its
competitive position in this segment is augmented by its ability to draw upon
the expertise and resources of other Volt segments.


8


The Company's stock price could be extremely volatile and, as a result,
investors may not be able to resell their shares at or above the price they paid
for them.

Among the factors that could affect the Company's stock price are:

o while the Company's stock is traded on the New York Stock Exchange, there
is limited float, and a relatively low average daily trading volume;

o industry trends and the business success of the Company's customers;

o loss of a key customer;

o fluctuations in the Company's results of operations;

o the Company's failure to meet the expectations of the investment community
and changes in investment community recommendations or estimates of the
Company's future results of operations;

o strategic moves by the Company's competitors, such as product announcements
or acquisitions;

o regulatory developments;

o litigation;

o general market conditions; and

o other domestic and international macroeconomic factors unrelated to our
performance.

The stock market has recently experienced extreme volatility that has often been
unrelated to the operating performance of particular companies. These broad
market fluctuations may adversely affect the market price of the Company's
common stock.

In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted. If a
securities class action suit is filed against us, we would incur substantial
legal fees and our management's attention and resources would be diverted from
operating our business in order to respond to the litigation.

The Company's principal stockholders and members of their families own a
significant percentage of the Company and will be able to exercise significant
influence over the Company and their interests may differ from those of other
stockholders.

As of December 31, 2003, the Company's principal officers controlled
approximately 47% of the Company's outstanding common stock. Accordingly, these
stockholders are able to control the composition of the Company's board of
directors and many other matters requiring shareholder approval and will
continue to have significant influence over the Company's affairs. This
concentration of ownership also could have the effect of delaying or preventing
a change in control of the Company or otherwise discouraging a potential
acquirer from attempting to obtain control of the Company.


9


Staffing Services Segment
- -------------------------

Volt's Staffing Services segment, through two divisions, Technical Placement and
Administrative and Industrial, provides a broad spectrum of staffing services in
three major functional areas: Staffing Solutions, Information Technology ("IT")
Solutions and E-Procurement Solutions, to a wide range of customers throughout
the United States, Canada and Europe. The Technical Placement division provides
Staffing Solutions, IT Solutions and E-Procurement Solutions, while the
Administrative and Industrial division provides Staffing Solutions.

Staffing Solutions
- ------------------

Volt markets a full spectrum of staffing solutions, such as managed services,
alternative staffing services and direct hire services, through its Volt
Services Group, Volt Human Resources and Volt Europe divisions. In addition,
professional employer organization ("PEO") services are offered by the Company's
subsidiary, Shaw & Shaw.

Volt Services Group/Volt Europe/Volt Human Resources (Staffing Solutions Group)

Staffing solutions provided by this segment are generally identified and
marketed throughout the United States as "Volt Services Group," throughout
Europe as "Volt Europe" and throughout Canada as "Volt Human Resources" (the
"Staffing Solutions Group") and provide a broad range of employee staffing and
professional services, from over 300 branches, including dedicated on-site
offices located on client premises. The Staffing Solutions Group is a
single-source provider of all levels of staffing, offering to customers an
extensive range of alternative employment services. Offerings include managed
staffing programs, known as VoltSource, in which the segment is responsible for
fulfilling a customer's entire alternative staffing requirements and engages
subcontractors to assist the segment in satisfying those requirements;
alternative staffing of clerical, administrative, light industrial, technical,
professional and information technology personnel; employment, direct hire and
professional personnel placement services; referred employee management
services; and specifically tailored recruitment services.

The Staffing Solutions Group provides skilled employees, such as computer and
other IT specialties, engineering, design, scientific and technical support, in
its Technical Placement division. This group also provides lesser skilled
employees, such as administrative, clerical, office automation, accounting,
bookkeeping and other financial, call center, light industrial and other
personnel, in its Administrative and Industrial division. The Staffing Solutions
Group matches available workers to employer assignments and, as a result,
competes both to recruit and maintain a database of potential employees and to
attract clients to employ contingent workers. Personnel placements are provided
for varying periods of time (both short and long-term) to companies and other
organizations (including government agencies and non profit entities) in a broad
range of industries that have a need for such personnel, but are unable, or
choose not to, engage certain personnel as their own employees. Customers range
from those that require one or two temporary employees to national accounts that
require as many as several thousand temporary employees at one time.


10



The Staffing Solutions Group furnishes temporary employees to meet specific
customer requirements, such as to complete a specific project or subproject
(with employees typically being retained until its completion), meet a
particular need that has arisen, substitute for regular employees during
vacation or sick leave, staff high turnover positions, fill in during the
full-time hiring process or during a hiring freeze, and staff seasonal peaks,
conversions, inventory taking and offices that are downsizing. In addition, the
Staffing Solutions Group provides management personnel to coordinate and manage
special projects and to supervise temporary employees.

Many customers use more than one staffing services provider; however, in recent
years, the practice of using a limited number of temporary suppliers, a sole
temporary supplier or a primary supplier has become increasingly important among
the largest companies. The Staffing Solutions Group has been successful in
obtaining a number of large national contracts, which typically require on-site
Volt representation and involve servicing multiple customer facilities. In
addition to contracting for traditional temporary staffing, many of Volt's
larger customers, particularly those with national agreements, have contracted
for managed services programs under which Volt, in addition to itself providing
staffing services, performs various administrative functions, which may include
centralized and coordinated order processing and procurement of other qualified
staffing providers as subcontractors, commonly referred to as "associate
vendors," for service in areas where the Company does not maintain an office, as
well as supplying secondary source back-up recruiting. In other managed
programs, requisitions are sent simultaneously to a number of staffing firms,
and Volt must compete for each placement. Other features of managed services
programs include customized and consolidated billing to the customer for all of
Volt's and associate vendors' services, and detailed management reports on
staffing usage and costs. Some managed services programs are tailored to the
customer's unique needs for ultimate single source consolidated billing,
reporting and payment. In most cases, Volt is required to pay the associate
vendor only after Volt receives payment from its customer. Volt also acts as an
associate vendor to other national providers in their managed services programs
to assist them in meeting their obligations to their customers. The bidding
process for these managed service and national contracts, in general, is very
competitive. Many contracts are for a one to three year time period, at which
time they are typically re-bid. Others are for shorter periods or may be for the
duration of a particular project or subproject or a particular need that has
arisen, which requires additional or substitute personnel. These contracts
expire upon completion of the project or when the particular need ends. Many of
these contracts typically require considerable start-up costs and usually take
from six to twelve months to reach anticipated revenue levels and reaching those
levels is dependant on the customer's requirements at that time. The Staffing
Solutions Group maintains a group dedicated to the acquisition, implementation
and service of national accounts; however, there can be no assurance that Volt
will be able to retain accounts that it currently serves, or that Volt can
obtain additional national accounts on satisfactory terms.

Branch offices that have developed a specialty in one or more disciplines often
use the name "Volt" followed by their specialty disciplines to identify
themselves. Other branch offices have adopted other names to differentiate
themselves from traditional temporary staffing when their focus is more project
oriented.

Volt Services Group and Volt Human Resources maintain computerized nationwide
resume databases, containing resumes of computer professionals, engineers and
other technical, professional and scientific candidates, from which they fill
customer job requirements. Volt Europe maintains similar computerized resume
databases containing resumes of candidates from the United Kingdom and
continental Europe. These higher skilled individuals employed by the Staffing
Solutions Group are frequently willing to relocate to fill assignments. In
addition to maintaining its proprietary internet recruiting sites, the segment
has numerous contracts with independent job search web site companies. Lesser
skilled employees are generally recruited and assigned locally, and employment
information/resumes for these employees are maintained in computerized databases
at branch offices.


11


Individuals hired by the Staffing Solutions Group typically become Volt
employees or contractors during the period of their assignment. As employer of
record, Volt is responsible for the payment of salaries, payroll taxes, workers'
compensation and unemployment insurance and other benefits, which may include
paid sick days, holidays and vacations and medical insurance. Class action
lawsuits have been instituted in the United States against some users of
temporary services, including some customers of the Company, by certain
temporary employees assigned to the customers, and a few have been threatened or
commenced against providers of temporary services, including one case instituted
against the Company and other temporary agencies. In general, these lawsuits
claim that certain temporary employees should be classified as the customers'
employees and are entitled to participate in certain of the customers' benefit
programs. In the Company's European markets, temporary services are more heavily
regulated and litigation and governmental activity (at European Union and
national levels) directed at the way the industry does business is also being
conducted or considered. Volt does not know the effect, if any, the resolution
of these cases or the outcome of this governmental activity will have on the
industry in general or upon the Staffing Solutions Group's business.

Volt Services Group and Volt Europe also provide permanent employment services.
In the United States, these services are provided through Volt Professional
Placement, which is dedicated to serve as an employment search organization
specializing in the recruitment and direct hire of individuals in professional
disciplines including information technology, technical, accounting, finance and
administrative support disciplines. The direct placement recruiters operate
within Volt's existing United States and European branch system. Customers of
this service include customers of Volt's Staffing Services and other segments.

Shaw & Shaw

Shaw & Shaw, Inc. provides professional employer organization ("PEO") services,
also known as "employee leasing," as part of the Administrative and Industrial
division. The customer using these services generally transfers its entire work
force or employees of a specific department or division to Shaw & Shaw. Shaw &
Shaw's services include payroll administration, human resource administration,
consulting on employee legal and regulatory compliance, providing comprehensive
benefits, including retirement plans, workers' compensation coverage, loss
control and risk management and certain other services. The customer has control
over the day-to-day job duties of the employees. Shaw & Shaw utilizes the
purchasing power of the Company and, thus, is able to provide its customers'
employees with a competitive benefits package. Customers are relieved of the
administrative responsibilities involved in maintaining employees.

Shaw & Shaw provides and markets its services to large and small client
companies in a broad spectrum of industries and non-profit organizations. Sales
generated by Shaw & Shaw in fiscal 2003 represented less than 1% of the Staffing
Services segment's total sales due to the Company reporting these revenues net
of related payroll costs.


12


Information Technology Solutions
- --------------------------------

VMC Consulting/Volt Europe Solutions

VMC Consulting (VMC) and Volt Europe Solutions are outsource consulting
companies offering a comprehensive portfolio of project-based professional
services from quality assurance, software/firmware testing to extended sales and
customer support in outsource, insource or blended environment to Global 2000
clients in 30 states in North America and 7 countries in Asia and Europe.

These business units, as part of the Technical Placement division, perform
outsource services in the form of project-based work, in which the Company
assumes responsibility for project milestones and deliverables. Services include
hardware and software testing, software development, systems integration,
project management, information technology services, technical communications,
extended sales, technical support and technical communications call centers,
information technology services, systems integration and software development
and logistics and clinical research. State-of-the-art technology solutions are
delivered to clients on a project basis, with the work performed either in
Volt's premises or at the client's location.

The Company's Information Technology Solutions services are generally marketed
throughout the United States under the names VMC Consulting, in Canada under the
name VMC Consulting Canada and in the United Kingdom and continental Europe
under the names Volt Europe Solutions and VMC Consulting Europe. VMC Consulting
is based in Redmond, Washington. Volt Europe Solutions is based in Redhill,
England and VMC Consulting Europe is based in Slough, England.

Although VMC Consulting and Volt Europe Solutions continue their efforts to
increase their customer base and to broaden their services, there is no
assurance that this group's present or future services will be competitive, that
the units will continue to obtain new customers or renew and/or extend existing
customer contracts or develop new services or that its present services or new
services will continue to be successfully marketed.


13


E-Procurement Solutions
- -----------------------

ProcureStaff

Increasingly, corporations, industry consortia and other buying communities are
leveraging the efficiencies of the internet to maximize their buying power. To
take advantage of this emerging e-commerce market, the Staffing Services
segment, through a wholly-owned subsidiary, ProcureStaff, Ltd., provides managed
services programs by means of a vendor neutral, web-based procurement and
management solution for alternative staffing.

A vendor neutral program enables customers to fulfill their staffing
requirements selecting an employee from a number of staffing firms, including
Volt (if a selected vendor), based upon the customer requirements and the skills
of the candidates. At the core of the ProcureStaff model are Consol and HRP,
patent pending business-to-business e-commerce procurement applications that are
designed to streamline client and vendor functions with increased efficiencies
while significantly reducing costs.

Utilizing Consol and HRP, web-based software systems, and proprietary management
methodologies, ProcureStaff provides procurement and management solutions for
supplemental or alternative staffing, primarily in the United States and Europe
as part of the Technical Placement division. The Company believes that
ProcureStaff represents the next generation of staffing services systems and
software.

Consol automates and manages the source-to-settle process for resource-based
services to provide visibility and centralized control over all categories of
enterprise-wide services expenditures. ProcureStaff provides this
source-to-settle process to its customers with web-based access for requisition
management, electronic procurement, relationship management, vendor management,
time keeping, consolidated invoicing, resource redeployment, demand management
and sophisticated graphical ad-hoc management reporting.

By adhering to open standards, ProcureStaff enables both customers and vendors
to facilitate implementation with minimal cost and resources. Implementation of
these programs typically requires considerable start up costs by ProcureStaff
and usually takes up to four months. ProcureStaff competes with other companies
which provide similar vendor neutral solutions, some of which are affiliated
with competitive staffing companies. ProcureStaff believes that its experience
in developing and implementing sophisticated software solutions and on-site
staffing management for major domestic and international corporations provides
the type of expertise necessary to build superior global staffing and vendor
procurement solutions.

The enhancements to ProcureStaff's software systems and the ability of
ProcureStaff to offer a vendor neutral procurement environment are designed to
enable ProcureStaff to pursue new opportunities in the business-to-business
marketplace.

Although ProcureStaff continues its efforts to obtain new customers and to
develop and enhance its services and systems, there is no assurance that this
division's present or future services will be competitive, that the division
will continue to obtain new customers or renew and/or extend existing customer
contracts or develop new services or that present services or new services will
continue to be successfully marketed.


14


During the week ended November 2, 2003, the entire Staffing Services segment
provided approximately 36,700 (31,500 in 2002) of its own employees to its
customers, in addition to employees provided by subcontractors and associate
vendors.

While the markets for the entire Staffing Services segment's services include a
broad range of industries throughout the United States and Europe, general
economic conditions in specific geographic areas or industrial sectors have had,
in the present are having and in the future could have, an effect on the
profitability of this segment. The segment has been adversely affected by the
weakened economy in the United States and Europe, causing customers to
significantly reduce their requirement for alternative and permanent staffing
and the other services provided by this segment. The segment has also
experienced margin erosion caused by increased competition, electronic auctions
and customers leveraging their buying power by consolidating the number of
vendors with whom they deal. The segment has implemented a series of cost
cutting initiatives and is committed to further efficiencies designed to
increase profitability. However, there can be no assurances that this increase
in profitability will occur. In addition, this segment could be adversely
affected by changes in laws, regulations and government policies, including the
results of pending litigation and governmental activity regarding the staffing
services industry, and related litigation expenses, customers' attitudes toward
outsourcing and temporary personnel, any decreases in rates of unemployment in
the future and higher wages sought by temporary workers, especially those in
certain technical fields often characterized by labor shortages.

The Company has increased the number of its offices which offer higher margin
project-oriented services to its customers and thus assumed greater
responsibility for the finished product. As the Staffing Services segment
increases the amount of project-oriented work it performs for customers, the
risks of unsuccessful performance, including claims by customers, uncompensated
rework and other liabilities increase. While the Company believes that it can
successfully implement these project-based contracts, there can be no assurance
that the Company will be able to do so, or that it can continue to obtain such
contracts on a satisfactory basis or continue delivering quality results that
satisfy its customers.

The ability of the entire Staffing Services segment to compete successfully for
customers depends on its reputation, pricing and quality of service provided and
its ability to engage, in a timely manner, personnel meeting customer
requirements. Competition varies from market-to-market and country-to-country
and in most areas, there are limited barriers to entry and no single provider
has a dominant share of the market. The staffing services market is highly
competitive, particularly for office clerical and light industrial personnel.
Pricing pressure from customers and competitors continues to be significant and
high state unemployment and workers compensation rates continue to impact
margins. Many of the contracts entered into by this segment are of a relatively
short duration, and awarded on the basis of competitive proposals which are
periodically re-bid by the customer. Under many of these contracts, there is no
assurance of any minimum amount of work that will actually be available.
Although Volt has been successful in obtaining various short and long-term
contracts in the past, in many instances margins under these contracts have
decreased. There can be no assurance that existing contracts will be renewed on
satisfactory terms or that additional or replacement contracts will be awarded
to the Company, or that revenues or profitability from an expired contract will
be immediately replaced. Some of this segment's national contracts are large,
and the loss of any large contract could have a significantly negative effect on
this segment's business unless, and until, the business is replaced. The segment
competes with many technical service, temporary personnel, other alternative
staffing and permanent placement firms, some of which are larger and have
substantially greater financial resources than Volt, as well as with individuals
seeking direct employment with the Company's existing and potential customers.


15


Telephone Directory Segment
- ---------------------------

Volt's Telephone Directory segment publishes independent telephone directories
in the United States and publishes telephone directories in Uruguay under a
contract with the government-owned telephone company; provides telephone
directory production, commercial printing, database management, sales and
marketing services; licenses directory production and contract management
software systems to directory publishers and others; and provides various
computer-based services to public utilities and financial institutions. This
segment has transitioned in the United States, from the production of telephone
directories for others, to the publishing of its own independent telephone
directories. This segment consists of DataNational, Directory Systems/Services,
the Uruguay division and Volt VIEWtech.

DataNational

DataNational, Volt's independent telephone directory publisher, principally
publishes community-based directories, primarily in the mid-Atlantic and
southeastern portions of the United States, Arkansas and Texas.
DataNational's community-based directories provide consumers with
information concerning businesses that provide services within their local
geographic area. The directories may also include features that are unique
to the community, such as school information, maps and a calendar of
events. All of the DataNational directories are also available on the
internet at www.communityphonebook.info. The division identifies markets
where demographics and local shopping patterns are favorable to the
division's community-oriented product and expands accordingly. During
fiscal 2003, the division published 109 community, county and regional
directories. DataNational's principal competitors are regional telephone
companies, whose directories typically cover a much wider geographic area
than the DataNational directories, as well as other independent telephone
directory companies, which compete on the local level. DataNational's
revenues are generated from yellow page advertising sold in its
directories. Volt believes that advertisers are attracted to DataNational's
community directories because the directories enable them to specifically
target their local markets at a much lower cost.

Directory Systems/Services

Directory Systems/Services develops and markets telephone directory systems
and services to directory publishers, using computer systems manufactured
by others, combined with proprietary software developed by the Company and
by third parties specifically for the division. These systems manage the
production and control of databases principally for directory and other
advertising media publishers and produce digitized display advertisements
and photocomposed pages, with integrated graphics for yellow and white
pages directories, as well as CD/ROM directories. These systems incorporate
"workflow management," by which ads are automatically routed between
workstations, increasing throughput and control, including management of
additions and deletions of listings. These systems are licensed to, and the
services are performed for, publishers and others worldwide, as well as for
the segment's DataNational division.


16


Directory Systems/Services also publishes semi-annually The National
Internet Toll-Free Directory ( www.internettollfree.com ), which provides
Internet web sites and toll-free listings for businesses. The revenues for
this product are generated by selling advertising in this directory and
from the sale of directories to third party resellers.

Uruguay

Volt's Uruguay division is the official publisher of white and yellow pages
telephone directories for Antel, the government-owned telephone company in
Uruguay, under a contract originally entered into in 1983 and subsequently
extended through 2006. Revenues are generated from the sale of yellow page
advertising.

In addition to the directory business, Volt's Uruguay division owns and
operates one of the most advanced directory printing facilities in South
America, which includes, among other presses, a high speed, four-color,
heat set printing press that is used to print not only its own telephone
directories, but also directories for publishers in other South American
countries. In addition, this facility does commercial printing, including
magazines and periodicals for various customers in Uruguay and elsewhere in
South and Central America.

Economic instability in neighboring countries, as well as in Uruguay
itself, continues to have a significant adverse impact on advertising and
printing revenue and operating profits. Because of this instability, the
Company is also seeking to renegotiate the contract with Antel, which could
result in an early termination or reduction (or increase) in directory
revenue and operating profits.

Volt VIEWtech

Volt VIEWtech services the energy and water utility industries, providing
energy and water conservation based customer services. VIEWtech is one of
the oldest and most experienced lenders and servicers for the Fannie Mae
Energy Loan program, which provides low interest and energy efficient home
improvement financing under major utility sponsorship. These loans are
immediately resold, after closing, to Fannie Mae. VIEWtech retains
servicing of loans after they are resold, providing billing, collection and
document custodian services on behalf of Fannie Mae. VIEWtech also provides
servicing for loans resold by other Fannie Mae Energy Loan lenders.
VIEWtech is also a utility rebate processing firm, processing energy and
water efficient appliance and home improvement rebates on behalf of
utilities across the nation.

Volt's ability to compete in its Telephone Directory segment depends on its
reputation, technical capabilities, price, quality of service and ability to
meet customer requirements in a timely manner. Volt believes that its
competitive position in this segment's areas of operations is augmented by its
ability to draw upon the expertise and resources of its other segments. The
segment faces intense competition for all of its services and products from
other suppliers and from in-house facilities of potential customers. Some of
this segment's significant competitors are companies that are larger and have
substantially greater financial resources than Volt. This segment's sales and
profitability are highly dependent on advertising revenue, which has been and
continues to be affected by general and local economic conditions.


17


Other than DataNational, a substantial portion of this segment's business is
obtained through submission of competitive proposals for contracts. These short
and long-term contracts are re-bid after expiration. While the Company has
historically secured new contracts and believes it can secure renewals and/or
extensions of some of these contracts, some of which are material to this
segment, and obtain new business and customers, there can be no assurance that
contracts will be renewed or extended, that the segment can successfully obtain
new business and customers or that additional or replacement contracts will be
awarded to the Company on satisfactory terms.


Telecommunications Services Segment
- -----------------------------------

Volt's Telecommunications Services segment provides telecommunications and other
services, including design, engineering, construction, installation, maintenance
and removals of telecommunications equipment for the outside plant and central
offices of telecommunications and cable companies, and within end-user premises,
throughout North America, Europe and in the Pacific Basin. This segment also
provides complete turnkey services for wireless telecommunications carriers and
wireless infrastructure suppliers and provides limited distribution of products.
In Europe, some services were performed by the Company's Volt Telecom Europe
subsidiary, which because of the telecommunications depression in Europe,
operated at reduced levels during the fiscal year and was operating at a minimal
level as of the end of the fiscal year.

The Telecommunications Services segment is a full-service provider of turnkey
solutions to the telecommunications, cable and related industries, as well as
for large corporations and governmental entities. The segment's services
include:

o Engineering services, including feasibility studies, right of way
acquisition, network design and detailed engineering for copper, coaxial
and fiber systems, carrier systems design, conduit design, computer-aided
design drafting, digitizing records, building industry consultant
engineering (BICSI), turnkey design, program management, air pressure
design and record verification.

o Construction services, including both aerial and underground construction
services, using the Company's owned and leased vehicles and equipment.
These services include jack and bore, directional boring, excavation for
conduit and manhole systems, cable placement and splicing, pole placement
and wrecking, copper, coaxial and long- and short-haul fiber optic cable
installation, splicing, termination and testing, project management and
inspection services. Construction services have been, and could in the
future, be adversely affected by weather conditions, because much of the
business is performed outdoors.

o Business Systems Integration services, including structured cabling and
wiring and field installation and repair services involving the design,
engineering, installation and maintenance of various types of local and
wide-area networks, utilizing copper wiring and fiber optics, for voice,
data and video, and digital subscriber lines (DSL) and other broadband
installation and maintenance services to operating telephone companies,
long distance carriers, telecommunications equipment manufacturers, cable
companies and large end-users, in both the government and private sectors.


18


o Central Office engineer, furnish and install (EF&I) services, including
central office engineering, installation and removal of transmission
systems, distribution frame systems, AC/DC power systems, wiring and
cabling, switch peripheral systems, equipment assembly and system
integration and controlled environment structures, and other network
support services, such as grounding surveys and asset management.

o Wireless services, including complete turnkey services to both fixed and
mobile wireless providers. This includes establishing or enhancing network
infrastructure, design, engineering and construction/installation services,
site selection, RF engineering, tower erection, antenna installation and
inside cabling and wiring services. In performing these services, the
segment employs the latest technologies, such as GPS mapping of facilities.

This segment also accommodates clients in the telecommunications industry that
require a full range of services from multiple Volt business segments, such as
human resources, systems analysis, network integration, software development and
turnkey applications. This segment also resells telecommunications equipment to
customers. In addition, this segment offers the added value of being able to
provide total management of multi-discipline projects because of its ability to
integrate efforts on a single project and to assume responsibility for programs
that require a single point of contact and uniform quality. The segment performs
these services on a project and/or contract personnel placement basis in the
outside plant, central offices, wireless sector and within end-user premises.
Customers include telephone operating companies, inter-exchange carriers, long
distance carriers, local exchange carriers, wireless carriers,
telecommunications equipment manufacturers, cable television providers,
electric, gas, water and water-services utilities, federal, state and municipal
government units and private industry.

This segment faces substantial competition with respect to all of its
telecommunications services from other suppliers and from in-house capabilities
of potential customers. Additionally, many customers provide the same type of
services as the segment, which means that the segment faces competition from its
own customers as well as from third parties. Some of this segment's significant
competitors are larger and have substantially greater financial resources than
Volt. There are relatively few significant barriers to entry into certain of the
markets in which the segment operates, and many competitors are small, local
companies that generally have lower overhead. Volt's ability to compete in this
segment depends upon its reputation, technical capabilities, pricing, quality of
service and ability to meet customer requirements in a timely manner. Volt
believes that its competitive position in this segment is augmented by its
ability to draw upon the expertise and resources of other Volt segments.

A portion of Volt's business in this segment is obtained through the submission
of competitive proposals for contracts that typically expire within one to three
years and upon expiration are re-bid and price is often an important factor in
the award of such agreements. Many of this segment's long-term contracts contain
cancellation provisions under which the customer can cancel the contract, even
if the segment is not in default under the contract. Therefore, these contracts
do not give the assurances that long-term contracts typically provide. Under
many of these contracts, including master service contracts, there is no
assurance of any minimum amount of work that will actually be available. While
the Company believes it can secure renewals and/or extensions of some of these
contracts, some of which are material to this segment, and obtain new business
and customers, there can be no assurance that contracts will be renewed or
extended or that additional or replacement contracts will be awarded to the
Company on satisfactory terms or that the Company can obtain new business and
customers. The continued delay in telecommunications companies' capital
expenditure projects during the current economic climate has significantly
reduced the segment's revenue, particularly from long-haul fiber optic projects
and cross-connect box projects, and little improvement can be expected until the
industry begins to increase its capital expenditures.


19


Computer Systems Segment
- ------------------------

The Computer Systems segment provides directory assistance services, and
designs, develops, sells, leases and maintains computer-based directory
assistance services along with other database management and related services,
primarily to the telecommunications industry. It also provides third party IT
services to others. This segment is comprised of three business units: VoltDelta
Resources ("VoltDelta"), DataServ and Maintech.

VoltDelta

VoltDelta markets information services solutions to telephone companies and
inter-exchange carriers worldwide. VoltDelta has transitioned its business
from only the sale of systems to, in addition, an Application Service
Provider ("ASP") model so that it now provides information services,
including infrastructure and database content, on a transactional use fee
basis.

To meet the needs of customers who desire to upgrade their operator
services capabilities by procuring services as an alternative to making a
capital investment, the unit has deployed and is marketing enhanced
directory assistance and other information service capabilities as a
transaction-based ASP service, charging a fee per transaction. One ASP
service is marketed as DirectoryExpress, which provides directory
assistance operators worldwide with access to over 180 million United
States and Canadian business, residential and government listings.
VoltDelta owns and operates its own proprietary systems and provides its
customers access to a national database sourced from listings obtained by
VoltDelta from the Regional Bell Operating Companies ("RBOCs") and other
independent sources. In addition, VoltDelta continues to provide customers
with new systems, as well as enhancements to existing systems, equipment
and software.

In addition to DirectoryExpress, VoltDelta's InfoExpress suite of services
includes iExpress, a service that enables its transaction-based customers
to offer operator-assisted yellow pages, directions and other information
dependent enhanced services. For consumers (the end-users), especially
cellular and PCS users, InfoExpress provides a more convenient and
efficient level of directory assistance service since, among other things,
consumers may obtain enhanced directory and yellow pages information
without having to know the correct area code or even the name of the
business. Enhanced information services are particularly attractive in the
wireless market, where there is no access to printed telephone directories.
VoltDelta's ASP services are being delivered over the switched telephone
network to live operators, via the internet and, recently, through voice
portals using speech recognition technologies.


20


VoltDelta has service agreements with major telecommunications carriers,
including RBOCs in the United States. Similar services are also provided to
major telecommunications providers in the United Kingdom, Belgium, Holland,
Italy, Germany and Ireland through Volt's wholly owned European
subsidiaries.

DataServ

DataServ was established in fiscal year 2002 as a separate division of
VoltDelta to target non-telco enterprise customers with enhanced directory
assistance and information services. The division's services utilize the
most accurate consumer and business databases to allow companies to improve
their operations and marketing capabilities. Working with VoltDelta and
other data aggregators, DataServ's information is updated daily and is
substantially augmented with specialized information unique to the
non-telco enterprise customer. DataServ integrates customer applications
access via XML and other advanced technologies with its various databases.
DataServ has agreements with several agents and resellers to distribute its
services into targeted industries.

Although VoltDelta was successful during fiscal year 2003 in obtaining new
customers for these services, including major telephone companies serving the
long distance and cellular markets, and DataServ commenced generating revenues,
there can be no assurance that they will continue to be successful in marketing
these services to additional customers, or that the customers' volume of
transactions will be at a level sufficient to enable the segment to maintain
profitability.

In order to fulfill its commitments under its contracts, VoltDelta and DataServ
are required to develop advanced computer software programs and purchase
substantial amounts of computer equipment, as well as license data content, from
several suppliers. Most of the equipment and data content required for these
contracts are purchased as needed and are readily available from a number of
suppliers.

Maintech

Maintech provides managed IT service solutions to mid-size and large
corporate clients across the United States, including many of those who
have purchased systems from VoltDelta. Its service offerings are tailored
to mission-control, multi-platform applications where standards of
operating performance and system availability are routinely defined as
99+%. Its target markets include banking and brokerage, telecommunications,
aerospace, healthcare and hospital, and higher education. Maintech's
services portfolio includes three groups of interrelated services:

o Hardware maintenance services, which includes on-site repair and Tier
1 & 2 technical support for Wintel and UNIX-based servers,
workstations and network products. Maintech is certified to support
products from most major OEMs including HP/Compaq, SUN, IBM, Dell,
Cisco and Nortel. Maintech also supports storage systems from Network
Appliance, EMC and STK. Representative application environments
include Wall Street trading desks, electronic funds transfer, R & D
laboratories and 411 Directory Assistance systems. Maintech provides
these programs on a 24 x 7 x 365 basis with available on-site, 2 hour
or 4 hour response terms.


21


o Network Operations Center (NOC) services, which includes 24 x 7 x 365
monitoring and management of LAN/WAN environments, network design,
carrier selection and management, and product procurement, deployment,
transition and support. Maintech's dual NOCs in Orange, California and
Wallington, New Jersey are staffed with certified network design and
support engineers, and employ state-of-the-art diagnostic monitoring
and management software. In addition to outside customers, Maintech
provides these services across the business units of Volt.

o Professional services, which includes comprehensive project management
for planning, design, deployment and support of enterprise-wide,
workstation/server/network upgrades, technology refresh programs,
warehousing, asset management, product integration and testing, and
installation and facility planning. This group of services is
attractive to the end user, as well as OEMs, VARs (value added
resellers) and distributors.

The Company believes that Maintech's strengths and economic structure
enable Maintech's customers to meet the demand to improve operating cost
parameters by using these IT services, particularly for those companies
that are correcting or adjusting an overbuilt IT infrastructure.

Maintech headquarters are in Wallington, New Jersey. District service
offices are located in most metropolitan areas across the United States.

The business environment in which this segment operates is highly competitive.
Some of this segment's principal competitors are larger and have substantially
greater financial resources than Volt. This segment's results are highly
dependent on the volume of directory assistance calls to VoltDelta's customers
which are routed to the segment under existing contracts, the segment's ability
to continue to secure comprehensive listings from others, its ability to obtain
additional customers for these services and on its continued ability to sell
products and services to new and existing customers. This segment's position in
its market depends largely upon its reputation, quality of service and ability
to develop, maintain and implement information systems on a cost competitive
basis. Although Volt continues its investment in research and development, there
is no assurance that this segment's present or future products will be
competitive, that the segment will continue to develop new products or that
present products or new products can be successfully marketed.

Some of this segment's contracts expired in 2003, while others were renewed and
new contracts were awarded to the segment. Other contracts are scheduled to
expire in 2004 through 2008. While the Company believes it can secure renewals
and/or extensions of some of these contracts, some of which are material to this
segment, and obtain new business and customers, there can be no assurance that
contracts will be renewed or extended or that additional or replacement
contracts will be awarded to the Company on satisfactory terms or that new
business and customers can be obtained.

Research, Development and Engineering
- -------------------------------------
During fiscal years 2003, 2002 and 2001, the Company expended approximately $2.1
million, $2.5 million and $2.5 million, respectively, on research, development
and engineering for product and service development and improvement,
substantially all of which is Company sponsored, and none of which was
capitalized. The major portion of research and development expenditures was
incurred by the Computer Systems segment.


22


In addition, the Company invests in software for internal use, including
planning, coding, testing, deployment, training and maintenance. In fiscal 2003,
expenditures for internal-use software were $19.3 million of which $5.9 million
was capitalized.

Intellectual Property
- ---------------------
"Volt" is a registered trademark of the Company under a number of registrations.
The Company also holds a number of other trademarks and patents related to
certain of its products and services; however, it does not believe that any of
these are material to the Company's business or that of any segment. The Company
is also a licensee of technology from many of its suppliers, none of which
individually is considered material to the Company's business or the business of
any segment.

Customers
- ---------
In fiscal 2003, the Telecommunications Services segment's sales to three
customers accounted for approximately 23%, 18%, and 12%, respectively, of the
total sales of that segment; the Computer Systems segment's sales to two
customers accounted for approximately 27% and 13% of the total sales of that
segment; the Staffing Services segment's sales to one customer accounted for
approximately 13% of the total sales of that segment; and the Telephone
Directory segment's sales to one customer accounted for approximately 10% of the
total sales of that segment. In fiscal 2003, the sales to seven operating units
of one customer, Microsoft Corporation, accounted for 10.6% of the Company's
consolidated net sales of $1.6 billion and 6.7% of the Company's consolidated
gross billings of $2.6 billion. The difference between net sales and gross
billings is the Company's associate vendor costs, which are excluded from sales
due to the Company's relationship with the customers and the Company's associate
vendors, who have agreed to be paid subject to receipt of the customers' payment
to the Company, which causes these sales to be recorded net. The Company
believes that gross billing is a meaningful measure, which reflects actual
volume by the customers.

In fiscal 2002, the Telecommunications Services segment's sales to three
customers accounted for approximately 24%, 20%, and 12%, respectively, of the
total sales of that segment; and the Computer Systems segment's sales to one
customer accounted for approximately 30% of that segment. In fiscal 2002, there
were no customers to which sales accounted for over 10% of the Company's
consolidated net sales.

In fiscal 2001, the Telecommunications Services segment's sales to three
customers accounted for approximately 23%, 17%, and 12%, respectively, of the
total sales of that segment; and the Computer Systems segment's sales to one
customer accounted for approximately 35% of that segment. In fiscal 2001, there
were no customers to which sales accounted for over 10% of the Company's
consolidated net sales.

Seasonality
- -----------
Historically, the Company's results of operations have been lowest in its first
fiscal quarter as a result of reduced requirements for the Staffing Services
segment's personnel due to the Thanksgiving, Christmas and New Year holidays as
well as certain customer facilities closing for one to two weeks. In addition,
the Telephone Directory segment's DataNational division publishes more
directories during the second half of the fiscal year. The Uruguay division of
the Telephone Directory segment produces a major portion of its revenues and
most of its profits in the Company's fourth fiscal quarter. During the third and
fourth quarter of the fiscal year, the Staffing Services segment benefits from a
reduction of payroll taxes and increased use of Administrative and Industrial
services during the summer vacation period.


23


Employees
- ---------
During the week ended November 2, 2003, Volt employed approximately 41,600
persons, including approximately 36,700 persons who were on temporary assignment
for the Staffing Services segment. Volt is a party to two collective bargaining
agreements, which cover a small number of employees. The Company believes that
its relations with its employees are satisfactory.

Certain services rendered by Volt's operating segments require highly trained
technical personnel in specialized fields, some of whom are currently in short
supply and, while the Company currently has a sufficient number of such
technical personnel in its employ, there can be no assurance that in the future,
these segments can continue to employ sufficient technical personnel necessary
for the successful conduct of their services.

Regulation
- ----------
The Company's business is not subject to specific industry government
regulations except that some states in the United States license temporary
service firms, employment agencies and construction companies. In Europe, the
temporary service business is subject to regulation at both country and European
levels. In connection with foreign sales by the Telephone Directory and Computer
Systems segments, the Company is subject to export controls, including
restrictions on the export of certain technologies. With respect to countries in
which the Company's Telephone Directory and Computer Systems segments presently
sell certain of their current products, the sale of their current products, both
hardware and software, are permitted pursuant to a general export license. If
the Company began selling to countries designated by the United States as
sensitive or developed products subject to restriction, sales would be subject
to more restrictive export regulations.

Compliance with applicable present federal, state and local environmental laws
and regulations has not had, and the Company believes that compliance with those
laws and regulations in the future will not have, a material effect on the
Company's earnings, capital expenditures or competitive position.

Access to Company Information
- -----------------------------
The Company electronically files its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, current reports on Form 8-K and all amendments to those
reports with the Securities and Exchange Commission ("SEC"). These and other SEC
filings by the Company are available to the public over the Internet at the
SEC's website at http://www.sec.gov and at the Company's website at
http://www.volt.com in the Investor Information section as soon as reasonably
practicable after they are electronically filed with the SEC. Copies are also
available without charge upon request to Volt Information Sciences, Inc., 560
Lexington Avenue, New York, New York 10022, 212-704-2400, Attention: Shareholder
Relations.


24


ITEM 2. PROPERTIES

The Company occupies approximately 38,000 square feet of space at 560 Lexington
Avenue, New York, New York under leases that expire in 2007 and 2009. The
facility serves as the Company's corporate headquarters, the headquarters for
the Company's Computer Systems segment and a base for certain operations of the
Company's Staffing Services segment. The following table sets forth certain
information as to each of the Company's other major facilities:



Approximate Sq .Ft. If Leased, Year of
Location Business Segment Leased Or Owned Lease Expiration
- -------- ---------------- ------------------- -------------------

Orange, West Region Headquarters 200,000 Owned (1)
California Accounting Center
Staffing Services
Computer Systems

Anaheim, Telephone Directory 39,000 Owned
California

El Segundo, Staffing Services 20,000 Owned
California

San Diego, Staffing Services 20,000 Owned
California

Montevideo, Telephone Directory 96,000 2004
Uruguay

Blue Bell, Telephone Directory 51,000 2007
Pennsylvania Computer Systems

Redmond, Staffing Services 46,000 2010
Washington 40,000 2005

Edison, Telecommunications Services 42,000 2005
New Jersey

Wallington, Computer Systems 32,000 2008
New Jersey


(1) See Note F of Notes to Consolidated Financial Statements for information
regarding a term loan secured by a deed of trust on this property.



25


ITEM 2. PROPERTIES--Continued

In addition, the Company owns a 134,000 square foot facility in Thousand Oaks,
California, which was leased by the Company to its former 59% owned subsidiary,
Autologic Information International, Inc. until December 31, 2002. The Company
has entered into an agreement with an unrelated party, which subject to due
diligence, may result in a lease to commence in fiscal 2004 with an option to
purchase the facility.

In addition, the Company leases space in approximately 230 other facilities
worldwide (excluding month-to-month rentals), each of which consists of less
than 20,000 square feet. These leases expire at various times from 2004 until
2011.

At times, the Company leases space to others in the buildings that it owns or
leases, if it does not require the space for its own business. The Company
believes that its facilities are adequate for their presently anticipated uses
and that it is not dependent upon any individually leased premises.

For additional information pertaining to lease commitments, see Note P of Notes
to Consolidated Financial Statements.


ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is party to certain claims and legal proceedings
which arise in the ordinary course of business, including those discussed in
Item 1 of this Report. There are no claims or legal proceedings pending against
the Company or its subsidiaries, which, in the opinion of management, would have
a material adverse effect on the Company's consolidated financial position or
results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


26


EXECUTIVE OFFICERS
------------------

WILLIAM SHAW, 79, a founder of the Company, has been President and Chairman of
the Board of the Company since its inception in 1957 and has been employed in
executive capacities by the Company and its predecessors since 1950.

JEROME SHAW, 77, a founder of the Company, has been Executive Vice President and
Secretary of the Company since its inception in 1957 and has been employed in
executive capacities by the Company and its predecessors since 1950.

JAMES J. GROBERG, 75, has been a Senior Vice President and Principal Financial
Officer of the Company since September 1985 and was also employed in executive
capacities by the Company from 1973 to 1981.

STEVEN A. SHAW, 44, has been a Senior Vice President of the Company since
November 2000 and served as Vice President of the Company from April 1997 until
November 2000. Mr. Shaw has been employed by the Company in various capacities
since November 1995.

HOWARD B. WEINREICH, 61, has been General Counsel of the Company since September
1985 and a Senior Vice President of the Company since May 2001. He has been
employed in executive capacities by the Company since 1981.

THOMAS DALEY, 49, has been Senior Vice President of the Company since March 2001
and has been employed in executive capacities by the Company since 1980.

LUDWIG M. GUARINO, 52, has been Treasurer of the Company since January 1994 and
has been employed in executive capacities by the Company since 1976.

JACK EGAN, 54, has been Vice President - Corporate Accounting and Principal
Accounting Officer since January 1992 and has been employed in executive
capacities by the Company since 1979.

DANIEL G. HALLIHAN, 55, has been Vice President - Accounting Operations since
January 1992 and has been employed in executive capacities by the Company since
1986.

NORMA J. KRAUS, 72, has been Vice President - Human Resources since March 1987
and has been employed in executive capacities by the Company since 1979.

William Shaw and Jerome Shaw are brothers. Steven A. Shaw is the son of Jerome
Shaw. Bruce G. Goodman, a director of the Company, is the son-in-law of William
Shaw. There are no other family relationships among the executive officers or
directors of the Company.


27


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK RELATED STOCKHOLDER MATTERS AND
INSIDER PURCHASES OF EQUITY SECURITIES

The Company's common stock is traded on the New York Stock Exchange (NYSE
Symbol-VOL). The following table sets forth the high and low prices of Volt's
common stock, as reported by the NYSE, during the Company's two fiscal years
ended November 2, 2003:



2003 2002
-------------------------------- --------------------------------
Fiscal Period High Low High Low
------ ------ ------ ------

First Quarter $18.92 $13.15 $17.25 $11.10
Second Quarter 14.40 9.39 22.90 14.50
Third Quarter 18.80 12.11 24.50 18.70
Fourth Quarter 19.45 15.40 18.95 12.65



As of January 9, 2004, there were approximately 362 holders of record of the
Company's common stock, exclusive of shareholders whose shares were held by
brokerage firms, depositories and other institutional firms in "street name" for
their customers.

Cash dividends have not been paid during the reported periods. The Company's
credit agreement contains financial covenants, one of which limits dividends in
any fiscal year to 25% of the prior year's consolidated net income, as defined.
Therefore, the amount available for dividends at November 2, 2003 was $1.2
million.

Equity Compensation Plans

The following table sets forth-certain information, as at November 2, 2003, with
respect to the Company's equity compensation plans:



Number of securities to be Weighted-average Number of securities
issued upon exercise of exercise price of remaining available for
outstanding options, outstanding options, future issuance under
Plan Category warrants and rights warrants and rights equity compensation plans

Equity compensation plans approved
by security holders 582,539(a) $20.48 347,854(a)

Equity compensation plans not
approved by security holders - - -
------- ------- -------
Total 582,539 $20.48 347,854


(a) Under the Company's 1995 Non-Qualified Stock Option Plan, the Company's
only equity compensation plan. Upon the expiration, cancellation or
termination of unexercised granted options, shares subject to those options
will again be available for the grant of options under the plan.


28


Insider Equity Compensation Plans

The information called for by Item 703 of Regulation S-K (relating to purchases
of equity securities by the Company and affiliated purchasers) has been omitted
pursuant to the effective date provisions of the SEC release Nos. 33-8335,
34-48766, IC-26252 (November 10, 2003).



ITEM 6. SELECTED FINANCIAL DATA
Year Ended (Notes 1 and 2)
-------------------------------------------------------------------------------
November November November November October
2, 2003 3, 2002 4, 2001 3, 2000 29, 1999
-------- -------- -------- -------- --------
(In thousands, except per share data)


Net Sales--Note 3 $1,609,857 $1,467,786 $1,898,681 $2,099,600 $2,053,677
========== ========== ========== ========== ==========
Income (loss) from continuing operations -
before items shown below--Note 4 $4,761 ($5,187) $6,658 $31,402 $31,492
Discontinued operations--Note 5 4,310 (814) (697) (2,533)
Cumulative effect of a change in accounting -
goodwill impairment--Note 4 (31,927)
---------- ---------- ---------- ---------- ----------
Net income (loss) $4,761 ($32,804) $5,844 $30,705 $28,959
========== ========== ========== ========== ==========
Per Share Data
Basic:
Income (loss) from continuing operations -
before items shown below $0.31 ($0.34) $0.44 $2.08 $2.10
Discontinued operations 0.28 (0.06) (0.05) (0.17)
Cumulative effect of a change in accounting (2.10)
---------- ---------- ---------- ---------- ----------
Net income (loss) $0.31 ($2.16) $0.38 $2.03 $1.93
========== ========== ========== ========== ==========
Weighted average number of shares 15,218 15,217 15,212 15,139 15,023
========== ========== ========== ========== ==========
Diluted:
Income (loss) income from continuing
operations - before items shown below $0.31 ($0.34) $0.44 $2.05 $2.08
Discontinued operations 0.28 (0.06) (0.05) (0.17)
Cumulative effect of a change in accounting (2.10)
---------- ---------- ---------- ---------- ----------
Net income (loss) $0.31 ($2.16) $0.38 $2.00 $1.91
========== ========== ========== ========== ==========
Weighted average number of shares 15,225 15,217 15,244 15,316 15,153
========== ========== ========== ========== ==========

Total assets $538,693 $509,590 $637,236 $744,828 $618,329

Long-term debt, net of current portion $14,098 $14,469 $15,993 $32,297 $45,728




Note 1--Fiscal years 1999 and 2001 through 2003 consisted of 52 weeks, while
fiscal year 2000 consisted of 53 weeks.

Note 2--Cash dividends were not paid during the five-year period ended November
2, 2003.

Note 3--As previously announced, the Company has changed the method of
reporting revenues of its Professional Employer Organization ("PEO")
subsidiary, Shaw & Shaw, from gross billing to a net revenue basis in
fiscal year 2003. Accordingly, reported PEO revenues and related cost
of sales have been reduced in prior fiscal years, with no effect on
operating profit or the net results to the Company, as follows:
2002-$20.1 million, 2001-$33.6 million, 2000-$20.7 million and
1999-$15.0 million.


29


ITEM 6. SELECTED FINANCIAL DATA--Continued


Note 4--Fiscal 2002 included a non-cash charge of $31.9 million, or $2.10 per
share, recognized for goodwill impairment as of November 5, 2001
presented as a cumulative effect of a change in accounting.
Amortization of goodwill, included in continuing operations net of
taxes, which was not permitted to be amortized beginning in fiscal
year 2002 under Statement of Financial Accounting Standards No. 142,
is included in the prior fiscal years as follows: 2001 - $2.0 million,
or $0.13 per share; 2000 - $2.3 million, or $0.15 per share, and 1999
- $2.2 million, or $0.14 per share.

Pursuant to the Company's previously announced adoption of SFAS
No.145, results for fiscal year 2002 have been restated to give effect
to the reclassification of a charge of $2.1 million arising from the
March 2002 early payment of the Company's 7.92% senior notes to other
expense, previously presented as an extraordinary item.

Fiscal 2001 included a gain on the sale of the Company's interest in a
real estate partnership of $4.2 million ($2.5 million, net of taxes,
or $0.16 per share) and a gain on the sale of securities, net of a
write-down of other securities, of $5.6 million ($3.4 million, net of
taxes, or $0.22 per share).

In fiscal 1999, the Company recognized $2.0 million, or $0.13 per
share of a previously deferred gain on the sale in 1997 of its
interest in a Brazilian joint venture. In connection with the sale,
the Company granted credit with respect to the printing of telephone
directories by the Company's Uruguayan division and guaranteed the
venture's obligations with respect to certain import financing,
resulting in a partial deferral of the gain. Through fiscal year 1999,
the venture repaid substantially all of its obligations and the gain
was recognized.

Note 5-- Fiscal 2002 included a net gain of $4.3 million, or $0.28 per share,
including a tax benefit of $1.7 million (resulting from a taxable loss
versus a gain for financial statement purposes), from discontinued
operations resulting from the Company's sale of its 59% interest in
Autologic Information International, Inc. ("Autologic"), which was the
Company's former Electronic Publication and Typesetting segment. This
amount included a $4.5 million gain on the sale, partially offset by a
$0.2 million loss on operations. Accordingly, the results of
operations of Autologic have also been classified as discontinued in
the statements of income for fiscal years 1999 through 2001.


30


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Critical Accounting Policies
- ----------------------------

Management's discussion and analysis of its financial position and results of
operations are based upon the Company's 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 derives its revenues from several sources. The
revenue recognition methods, which are consistent with those prescribed in Staff
Accounting Bulletin 101 ("SAB 101"), entitled "Revenue Recognition in Financial
Statements," are described below in more detail for the significant types of
revenue within each of its segments.

Staffing Services:
Traditional Staffing: In fiscal 2003, this revenue comprised approximately
74% of consolidated sales. Sales are derived from the Company's Staffing
Solutions Group supplying its own temporary personnel to its customers, for
which the Company assumes the risk of acceptability of its employees to its
customers, and has credit risk for collecting its billings after it has
paid its employees. The Company reflects revenues for these services on a
gross basis in the period the services are rendered.

Managed Services: In fiscal 2003, this revenue comprised approximately 5%
of consolidated sales. Sales are generated by the Company's E-Procurement
Solutions' subsidiary, ProcureStaff, and for certain contracts, sales are
generated by the Company's Staffing Solutions Group's managed services
operations. The Company receives an administrative fee for arranging for,
billing for and collecting the billings related to other staffing companies
("associate vendors") who have supplied personnel to the Company's
customers. The administrative fee is either charged to the customer or
subtracted from the Company payment to the associate vendor. The customer
is typically responsible for assessing the work of the associate vendor,
who has responsibility for the acceptability of their personnel to the
customer, and in most instances the customer and associate vendor have
agreed to the Company not paying the associate vendor until the customer
pays the Company. Based upon the revenue recognition principles prescribed
in Emerging Issues Task Force 99-19 ("EITF 99-19"), entitled "Reporting
Revenue Gross as a Principal versus Net as an Agent", revenue for these
services, where the customer has agreed, is recognized net of associated
costs in the period the services are rendered.

Outsourced Projects: In fiscal 2003, this revenue comprised approximately
4% of consolidated sales. Sales are derived from the Company's Information
Technology Solutions' operation providing outsource services for a customer
in the form of project work, for which the Company is responsible for
deliverables. The Company's employees perform the services and the Company
has credit risk for collecting its billings. Revenue for these services is
recognized on a gross basis in the period the services are rendered, and
when the Company is responsible for project completion, revenue is
recognized when the project is complete and the customer has approved the
work.


31


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Critical Accounting Policies - Continued
- ----------------------------------------

Shaw & Shaw: In fiscal 2003, this revenue comprised less than 1% of
consolidated sales, due to the Company's reporting of these revenues
on a net basis. Sales are generated by the Company's Shaw & Shaw
subsidiary, for which the Company provides professional employer
organizational services ("PEO") to certain customers. Generally, the
customers transfer their entire workforce or employees of specific
departments or divisions to the Company, but the customers maintain
control over the day-to-day job duties of the employees. Based upon
the revenue recognition principles prescribed in EITF 99-19, effective
with the Company's second fiscal quarter of 2003, the Company has
changed its method of reporting revenue from these services from a
gross basis to a net basis. 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.

Telephone Directory:
Directory Publishing: In fiscal 2003, this revenue comprised
approximately 3% of consolidated sales. Sales are derived from the
Company's sales of telephone directory advertising for books it
publishes as an independent publisher or for a telephone company in
Uruguay. The Company's employees perform the services and the Company
has credit risk for collecting its billings. Revenue for these
services is recognized on a gross basis in the period the books are
printed and delivered.

Ad Production: In fiscal 2003, this revenue comprised approximately 1%
of consolidated sales. Sales are generated when the Company performs
design and production services, and database management for other
publishers' telephone directories. The Company's employees perform the
services and the Company has credit risk for collecting its billings.
Revenue for these services is recognized on a gross basis in the
period the Company has completed its ad production work and upon
customer acceptance.

Telecommunications Services:
Construction: In fiscal 2003, this revenue comprised approximately 3%
of consolidated sales. Sales are derived from the Company supplying
aerial and underground construction services related to
telecommunications and cable operations. The Company's employees
perform the services, and the Company takes title to all inventory,
and has credit risk for collecting its billings. The Company relies
upon the principles in Statement of Position 81-1 ("SOP 81-1"),
entitled "Accounting for Performance of Construction-Type Contracts,"
using the completed-contract method, to recognize revenue on a gross
basis upon customer acceptance of the project.

Non-Construction: In fiscal 2003, this revenue comprised approximately
4% of consolidated sales. Sales are derived from the Company
performing design, engineering and business systems integrations work.
The Company's employees perform the services and the Company has
credit risk for collecting its billings. Revenue for these services is
recognized on a gross basis in the period in which services are
performed, and if applicable, any completed units are delivered and
accepted by the customer.



32


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Critical Accounting Policies - Continued
- ----------------------------------------

Computer Systems:
Database Access: In fiscal 2003, this revenue comprised approximately
3% of consolidated sales. Sales are derived from the Company granting
access to its proprietary telephone listing databases to telephone
companies, inter-exchange carriers and non-telco enterprise customers.
The Company uses its own databases and has credit risk for collecting
its billings. The Company recognizes revenue on a gross basis in the
period in which the customers access the Company's databases.

IT Maintenance: In fiscal 2003, this revenue comprised approximately
2% of consolidated sales. Sales are derived from the Company providing
hardware maintenance services to the general business community,
including customers who have our systems. The Company uses its own
employees and inventory in the performance of the services, and has
credit risk for collecting its billings. Revenue for these services is
recognized on a gross basis in the period in which the services are
performed, contingent upon customer acceptance.

Telephone Systems: In fiscal 2003, this revenue comprised approximately 1% of
consolidated sales. Sales are derived from the Company providing
telephone operator services-related systems and enhancements to
existing systems, equipment and software to customers. The Company
uses its own employees and has credit risk for collecting its
billings. The Company relies upon the principles in Statement of
Position 97-2 ("SOP 97-2"), entitled "Software Revenue Recognition"
and Emerging Issues Task Force 00-21 ("EITF 00-21"), entitled "Revenue
Arrangements with Multiple Deliverables" to recognize revenue on a
gross basis upon customer acceptance of each part of the system based
upon its fair value.

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.

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.


33


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Critical Accounting Policies - Continued
- ----------------------------------------

Property, Plant and Equipment - 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 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.

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 consolidated balance sheet. The outstanding balance of the undivided
interest sold to Three Rivers Funding Corporation ("TRFCO"), an asset backed
commercial paper conduit sponsored by Mellon Bank, N.A, was $70.0 million and
$60.0 million at November 2, 2003 and November 3, 2002, respectively.
Accordingly, the trade receivables included on the November 2, 2003 and November
3, 2002 balance sheets have been reduced to reflect the $70.0 million and $60.0
million participation interest sold, respectively. 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.


Primary Casualty Insurance Program - The Company is insured with a highly rated
insurance company under a program that provides primary workers' compensation,
employer's liability, general liability and automobile liability insurance under
a loss sensitive program. In certain mandated states, the Company purchases
workers' compensation insurance through participation in state funds. The
experience-rated premiums in these state plans relieve the Company of any
additional liability. Initial premium accruals are established based upon the
underlying exposure, such as the amount and type of labor utilized, number of
vehicles, etc. The Company establishes accruals utilizing actuarial methods to
estimate the future cash payments that will be made


34



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Critical Accounting Policies - Continued
- ----------------------------------------

to satisfy the claims, including an allowance for incurred-but-not-reported
claims. This process also includes establishing loss development factors, based
on the historical claims experience of the Company and the industry, and
applying those factors to current claims information to derive an estimate of
the Company's ultimate premium liability. In preparing the estimates, the
Company considers the nature and severity of the claims, analyses provided by
third party actuaries, as well as current legal, economic and regulatory
factors. The insurance policies have various premium rating plans that establish
the ultimate premium to be paid. Prior to March 31, 2002, the amount of the
additional or return premium was finalized. Subsequent thereto, adjustments to
premium will be made based upon the level of claims incurred at a future date up
to three years after the end of the respective policy period. For the policy
year ending March 31, 2003, a maximum premium has been predetermined. Management
evaluates the accrual, and the underlying assumptions, regularly throughout the
year and makes adjustments as needed. The ultimate premium cost may be greater
than or less than the established accrual. While management believes that the
recorded amounts are adequate, there can be no assurances that changes to
management's estimates will not occur due to limitations inherent in the
estimation process. In the event it is determined that a smaller or larger
accrual is appropriate, the Company would record a credit or a charge to cost of
services in the period in which such determination is made.






35


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2003 (52 weeks) Compared to Fiscal Year 2002 (52 weeks)
- -------------------------------------------------------------------

Results of Operations
- ---------------------

The information that appears below relates to prior periods. The results of
operations for those periods are not necessarily indicative of the results,
which may be expected for any subsequent period. The following discussion should
be read in conjunction with the Operating Segment Data in Item 1 of this Report
and the Consolidated Financial Statements and Notes thereto which appear in Item
8 of this Report.

Results of Operations - Summary
- -------------------------------

Consolidated net sales increased by $142.1 million, or 10%, to $1.6 billion in
fiscal 2003. This increase in net sales resulted primarily from a $135.1 million
increase in sales in the Staffing Services segment. The Company's operating
segments reported an operating profit in fiscal 2003 of $39.4 million, an
increase of $16.6 million, or 73%, from the prior year, with all four segments
reflecting improvements. Contributing to the fiscal 2003 increase in operating
profit was a $9.3 million decrease in the operating loss sustained by the
Telecommunications Services segment, and increases in operating profit of $5.8
million by the Computer Systems segment, $0.9 million by the Telephone Directory
segment and $0.6 million by the Staffing Services segment.

In fiscal 2003, the Company reported income from continuing operations before
income taxes of $8.0 million compared to a loss from continuing operations
before taxes of $7.5 million in fiscal 2002. An item affecting results from
continuing operations in fiscal 2002 was a charge of $2.1 million arising from
the early payment of the Company's remaining $30.0 million 7.92% Senior Notes,
which was previously presented as an extraordinary item.

In fiscal 2003, the Company reported net income of $4.8 million compared with a
net loss of $32.8 million in the prior year. Results for fiscal 2002 included a
non-cash charge for the write-down of goodwill of $31.9 million reported as a
cumulative effect of a change in accounting and a net gain from discontinued
operations, after taxes, of $4.3 million. The net gain from discontinued
operations was comprised of a $4.5 million gain, including a tax benefit of $1.7
million (resulting from a taxable loss versus a gain for financial statement
purposes), on the sale of the Company's 59% interest in Autologic Information
International Inc. ("Autologic"), partially offset by a loss from Autologic's
operations through the disposal date of $0.2 million.

Results of Operations - By Segment
- ----------------------------------

Staffing Services
- -----------------

The sales of the Staffing Services segment increased by $135.1 million, or 11%,
to $1.3 billion in fiscal 2003, and its operating profit increased by $0.6
million, or 3%, to $21.1 million in fiscal 2003.

The sales of the Technical Placement division of the Staffing Services segment
increased by $45.4 million, or 6%, to $834.5 million in fiscal 2003, while its
operating profit decreased by $0.7 million, or 2%, to $28.9 million in fiscal
2003. Gross billings in the division increased by $360.1 million, or 23%, to
$1.9 billion during fiscal 2003 due to new ProcureStaff accounts. However,
substantially all of the ProcureStaff billings are


36


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2003 (52 weeks) Compared to Fiscal Year 2002 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - By Segment--Continued
- ----------------------------------

Staffing Services--Continued
- ----------------------------

reported on a net basis due to contracts with associate vendors who have agreed
to be paid upon receipt of the customers' payment to the Company. The sales of
VMC Consulting project management and consulting increased by $24.3 million, or
49%, and the net sales of ProcureStaff increased by $14.0 million, or 17%. The
decrease in the division's operating profit was due to an increase of overhead
expressed as a percentage of sales of 0.4 percentage point. The largest increase
in overhead costs from the prior year was in ProcureStaff, whose costs increased
by $5.6 million, or 2.7 percentage points, due to ongoing development of new
products and the implementation of new accounts. ProcureStaff incurred an
operating loss of $1.0 million for the year compared to an operating profit of
$0.3 million in the prior year due to these higher costs. The Technical
Placement division's gross margin percentages remained relatively constant
compared to fiscal 2002, with lower markups on traditional staffing placement
and higher state unemployment insurance rates, offset by higher margins earned
by VMC Consulting which, together with a 49% increase in sales, reported a 44%
increase in operating profit to $10.8 million in fiscal 2003 from $7.5 million
in fiscal 2002. The Technical Placement division recently lost a managed service
contract, the effect of which will be reflected in the first quarter of fiscal
2004. Revenue and gross profit from this contract approximated 4% each of the
division's total revenue and gross profit in both fiscal 2003 and 2002. The
division cannot determine the amount of revenue and gross profit that will be
replaced through existing or new customers in the future.

The sales of the Administrative and Industrial division of the Staffing Services
segment increased by $89.7 million, or 21%, to $510.9 million in fiscal 2003,
while its operating loss decreased by $1.3 million, or 14%, to $7.8 million in
fiscal 2003. The decrease in operating loss was the result of the increase in
sales, together with a decrease in overhead expressed as a percentage of sales
of 2.5 percentage points, partially offset by a 1.9 percentage point decrease in
gross margins due to higher state unemployment and workers' compensation rates,
increased competition, electronic auctions and customers leveraging their buying
power by consolidating the number of vendors with whom they deal. Although
sequential quarterly operating losses have declined during fiscal 2003, cost
control initiatives in the division have not fully offset lower gross margins.

While the Staffing Services segment is committed to continued cost controls
designed to increase profitability for fiscal 2004, 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 industry. The Company expects that high
unemployment and the need for state and local governments to align their
revenues with expenditures will continue to result in 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.


37


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2003 (52 weeks) Compared to Fiscal Year 2002 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - By Segment--Continued
- ----------------------------------

Telephone Directory
- -------------------

Sales of the Telephone Directory segment decreased by $13.2 million, or 16%, to
$70.2 million in fiscal 2003; however, its operating profit increased by $0.9
million, or 14%, to $7.7 million. Printing sales in Uruguay decreased by $3.6
million, or 45%, due to the economic instability in neighboring countries, as
well as in Uruguay itself. Due to a change in the publication schedule of the
DataNational operation's community telephone directories, their sales decreased
by $3.1 million, or 7%, for the year. The segment's telephone production revenue
decreased by $3.5 million, or 17%, in fiscal 2003 primarily due to the
previously announced termination of a contract with a telecommunications company
in the third quarter of fiscal 2003. The segment cannot determine whether
current revenue and profits will be replaced through existing or new customers,
or increased advertising sales by DataNational in the future. Despite the
reduced sales, the profitability of the segment increased due to increased
productivity, and a reduction in overhead expressed as a percentage of sales of
1.5 percentage points. The decreased overhead was predominantly related to a
lower bad debt expense as a result of a more stringent credit policy. Operating
profit in fiscal 2003 also included a $0.8 million fee due to the terminated
contract.

Other than the DataNational division, which accounted for 58% of the segment's
fiscal 2003 sales, the segment's business is obtained through submission of
competitive proposals for contracts. These short and long-term contracts are
re-bid after expiration. While the Company has historically secured new
contracts and believes it can secure renewals and/or extensions of most of these
contracts, some of which are material to this segment, and obtain new business,
there can be no assurance that contracts will be renewed or extended, or that
additional or replacement contracts will be awarded to the Company on
satisfactory terms. In addition, this segment's sales and profitability are
highly dependent on advertising revenue, which has been and continues to be
affected by general economic conditions.

Telecommunications Services
- ---------------------------

The Telecommunications Services segment's sales increased by $4.0 million, or
4%, to $112.8 million in fiscal 2003, and the segment's operating loss was
reduced by $9.3 million, or 70%, from fiscal 2002, to $4.0 million. The
reduction in the operating loss was due to the sales increase, a 1.2 percentage
point increase in gross margin, together with a reduction in overhead expressed
as a percentage of sales of 7.4 percentage points. Despite an emphasis on cost
controls, the results of the segment continue to be affected by the decline in
capital spending by telephone companies caused by the depressed conditions
within the segment's telecommunications industry customer base. This factor has
also increased competition for available work, pressuring pricing and margins.
Following the reorganization of the business operations initiated in fiscal
2002, the segment continued its cost control initiatives in an effort to permit
the segment to operate profitably at lower revenue levels without impairing its
ability to take advantage of opportunities when the telecommunications industry
stabilizes and customers' spending increases. The segment will incur a pre-tax
charge of $1.3 million in the first quarter of fiscal 2004 as a result of costs
incurred related to a domestic consulting contract for services.

A substantial portion of the business in this segment is obtained through the
submission of competitive proposals for contracts, which typically expire within
one to three years and are re-bid. Many of this segment's


38


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2003 (52 weeks) Compared to Fiscal Year 2002 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - By Segment--Continued
- ----------------------------------

Telecommunications Services--Continued
- ---------------------------

long-term contracts contain cancellation provisions under which the customer can
cancel the contract, even if the segment is not in default under the contract.
While management believes it can secure renewals and/or extensions of most of
these contracts, some of which are material to this segment, and obtain new
business, there can be no assurances that contracts will be renewed or extended
or that additional or replacement contracts will be awarded to the Company on
satisfactory terms.

Computer Systems
- ----------------

The Computer Systems segment's sales increased by $14.8 million, or 19%, to
$93.6 million in fiscal 2003, and operating profit increased by $5.8 million, or
65%, to $14.7 million. An increase in revenue was reported by all of the
divisions within the segment. The segment's ASP directory assistance
out-sourcing business, together with its domestic products and services,
reflected a 20% sales increase; its IT services sales provided by the Maintech
division reflected an 11% increase in sales, and sales of the European division
increased by 38% in fiscal 2003. The growth in operating profit for the year was
the result of the increase in sales, an increase in gross margins of 3.1
percentage points, and a reduction in overhead expressed as a percentage of
sales of 1.1 percentage points.

This segment's results are highly dependent on the volume of directory
assistance calls to the segment's customers that are routed to the segment under
existing contracts with telephone companies, the segment's ability to continue
to secure comprehensive listings from others, its ability to obtain additional
customers for these services and its continued ability to sell products and
services to new and existing customers.

Results of Operations - Other
- -----------------------------

Other items, discussed on a consolidated basis, affecting the results of
operations were:

Selling and administrative expenses decreased by $2.9 million, or 4%, to $71.6
million in fiscal year 2003 from fiscal year 2002 primarily as a result of
continued cost-cutting initiatives throughout the operating segments, and a
reduction of bad debt expense (see discussion by segment, above), partially
offset by 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. Selling and
administrative expenses, expressed as a percentage of sales, were 4.4% in fiscal
2003 and 5.1% in fiscal 2002.

Depreciation and amortization increased by $2.2 million, or 10%, to $24.3
million in fiscal 2002. The increase was attributable to the increase in fixed
assets during the year in the Staffing Services and Computer Systems segments.

The Company incurred other expense of $2.7 million in fiscal 2003 compared to
$3.5 million in 2002. The fiscal 2003 expense was primarily the result of $1.6
million of charges related to the Company's Securitization Program, which began
in April 2002 and significantly reduced interest expense, as well as sundry
expenses.


39


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2003 (52 weeks) Compared to Fiscal Year 2002 (52 weeks)
- -------------------------------------------------------------------

Results of Operations - Other--Continued
- -----------------------------

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, which was previously presented as an extraordinary item, along
with expenses incurred in conjunction with the initial and subsequent
transactions under the Company's Securitization Program and other sundry
expenses.

The foreign exchange gain in fiscal 2003 was $0.3 million compared to a loss of
$0.5 million in fiscal 2002. The improvement was a result of favorable currency
movements in the Uruguayan and European currency markets. To reduce the
potential adverse impact from foreign currency changes on the Company's foreign
currency receivables and firm commitments, the Company utilizes foreign currency
option and forward contracts, when appropriate, that generally settle on the
last weekday of each quarter.

Interest expense decreased by $2.5 million, or 54%, to $2.1 million in fiscal
2003. The decrease was attributable to the early repayment on March 5, 2002 of
the remaining $30.0 million of 7.92% Senior Notes 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, which was not used
in fiscal 2003. Throughout fiscal 2003, the Company has also benefited from
significantly lower interest rates on borrowings in Uruguay.

The Company's tax provision in 2003 reflected an effective tax rate of 40.8% of
its financial reporting pre-tax income from continuing operations compared to a
2002 tax benefit effective rate of 30.9% of its financial reporting pre-tax loss
from continuing operations. The low effective tax benefit in fiscal 2002 was
primarily due to 2002 foreign losses for which no tax benefit was provided.

The consolidated results for fiscal 2002 included a net gain from discontinued
operations of $4.3 million which consisted 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.

As of the beginning of fiscal 2002, the Company performed the first of the
required impairment tests of goodwill and other intangible assets, in accordance
with SFAS No. 142. 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 writedown was taken, reflecting declines in the
market value of the acquisitions since they were purchased. The writedown 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.


40


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2002 (52 weeks) Compared to Fiscal Year 2001 (52 weeks)
- -------------------------------------------------------------------

Results of Operations - Summary
- -------------------------------

Consolidated net sales decreased by $430.9 million, or 23%, to $1.5 billion in
fiscal 2002. This decrease in net sales resulted primarily from a $287.5 million
decrease in sales in the Staffing Services segment and a $140.1 million decrease
in sales in the Telecommunications Services segment.

The Company's operating segments reported an operating profit of $22.8 million
in fiscal 2002 compared to $36.9 million in the prior year. Contributing to the
fiscal 2002 decrease in operating profit were a decrease in operating results of
$20.6 million reported by the Telecommunications Services segment and a decrease
of $1.8 million in operating profit reported by the Computer Systems segment.
These decreases were partially offset by increases in operating profits of $4.4
million reported by the Telephone Directory segment and $3.9 million by the
Staffing Services segment.

In fiscal 2002, the Company reported a loss from continuing operations before
income taxes of $7.5 million compared to income from continuing operations
before taxes of $11.0 million in fiscal 2001. Non-recurring items affecting
results from continuing operations in fiscal 2002 included a charge of $2.1
million arising from the early payment of the Company's 7.92% Senior Notes,
which was previously presented as an extraordinary item. Non-recurring items
affecting results from continuing operations in fiscal 2001 included a gain of
$6.3 million on the sale of an investment in equity securities that had been
written off in 1997, partially offset by a write-down of an investment in
marketable securities of $0.7 million and a gain on the sale of the Company's
interest in a real estate partnership of $4.2 million. In addition, results from
continuing operations for fiscal 2001 included amortization of goodwill, which
is no longer permitted to be amortized, of $3.0 million.

In fiscal 2002, the Company reported a net loss of $32.8 million compared with
net income of $5.8 million in the prior year. Results for fiscal 2002 included a
non-cash charge for the write-down of goodwill of $31.9 million reported as a
cumulative effect of a change in accounting and a net gain from discontinued
operations, after taxes, of $4.3 million comprised of a $4.5 million gain,
including a tax benefit of $1.7 million (resulting from a taxable loss versus a
gain for financial statement purposes), on the sale of the Company's 59%
interest in Autologic Information International Inc. ("Autologic") partially
offset by a loss from Autologic's operations through the disposal date of $0.2
million (compared to a loss of $0.8 million in fiscal 2001).

Results of Operations - By Segment
- ----------------------------------

Staffing Services
- -----------------

Although sales of the Staffing Services segment decreased by $287.5 million, or
19%, to $1.2 billion in fiscal 2002, its operating profit increased by $3.9
million, or 24%, to $20.5 million in fiscal 2002.

The Technical Placement division of the Staffing Services segment reported an
operating profit of $29.6 million on sales of $789.2 million for fiscal 2002,
compared with an operating profit of $27.5 million on sales of $1.1 billion in
the prior year. Gross billings in the division increased by $26.9 million, or
2%, to $1.6 billion during


41


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2002 (52 weeks) Compared to Fiscal Year 2001 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - By Segment--Continued
- ----------------------------------

Staffing Services--Continued
- -----------------

fiscal 2002. Low-margin managed service sales comprised 62% of the reported
sales decline of the division. The decline was due primarily to an increase in
the number of associate vendors who agreed to be paid subject to the receipt of
the customers' payment to the Company, resulting in the amounts, other than
management fees to the Company, associated with those revenues being excluded
from sales, as non-recourse managed service revenue. A reduction in the use of
managed service programs by several of the division's managed service clients
also adversely affected sales. Although the division reported decreases in both
traditional and managed service sales, an increase in high-margin project
management work contributed to an increase in gross margins of 3.9 percentage
points. In addition, the division's continued overhead reductions and the
absence in fiscal 2002 of goodwill amortization of $2.1 million enabled the
Technical Placement division to increase its operating profit and profit margin
percentage.

The Administrative and Industrial division of the Staffing Services segment
reported an operating loss of $9.1 million on net sales of $421.2 million for
fiscal 2002 compared with an operating loss of $10.9 million on net sales of
$445.8 million in the prior period. The decrease in operating loss was the
result of lower overhead due to cost reduction efforts partially offset by a 6%
decline in revenue and a decrease in gross margins of 1.4 percentage points due
to increased competition, electronic auctions and customers leveraging their
buying power by consolidating the number of vendors with whom they deal.
Although sequential quarterly operating losses have declined during fiscal 2002,
cost control initiatives in the past have not fully offset lower revenue and
gross margins.

Telephone Directory
- -------------------

While the Telephone Directory segment's sales decreased by $16.6 million, or
17%, to $83.3 million in fiscal 2002, its operating profit increased by $4.5
million, or 200%, to $6.7 million. The reduction in sales was primarily due to
lower printing and advertising revenue in Uruguay due to the economic
instability in neighboring countries, as well as in Uruguay itself, along with
decreased toll-free directory advertising revenue in the United States. Despite
the reduced sales, decreases in paper prices, production costs and overhead,
along with increased productivity and the absence in fiscal 2002 of goodwill
amortization of $0.7 million resulted in the higher profitability of the
segment.

Telecommunications Services
- ---------------------------

The Telecommunications Services segment's sales decreased by $140.1 million, or
56%, to $108.9 million in fiscal 2002 and the segment sustained an operating
loss of $13.3 million in fiscal 2002, compared to an operating profit of $7.4
million in fiscal 2001. Despite a decrease in overhead of 32% due to the
emphasis on overhead reductions, the results of the segment continue to be
affected by the decline in spending caused by the depressed conditions within
the segment's telecommunications industry customer base. This factor has also


42


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2002 (52 weeks) Compared to Fiscal Year 2001 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - By Segment--Continued
- ----------------------------------

Telecommunications Services --Continued
- ----------------------------

increased competition for available work, pressuring pricing and margins. During
fiscal 2002, the Company announced the reorganization of the segment's
operations and continued its cost control initiatives in an effort to permit the
segment to operate profitably at lower revenue levels without impairing its
ability to take advantage of opportunities when the telecommunications industry
stabilizes and customers' spending increases.

Computer Systems
- ----------------

The Computer Systems segment's sales increased by $7.5 million, or 11%, to $78.8
million in fiscal 2002 while its operating profit decreased by $1.8 million, or
17%, to $8.9 million. The higher operating profit in fiscal 2001 resulted from
the beneficial settlement with a vendor. An increase in sales, in fiscal 2002,
was reported by all of the segment's divisions, with the sales in the European
division increasing by 51% and the IT services sales of the Maintech division
increasing by 12%.

Results of Operations - Other
- -----------------------------

Other items, discussed on a consolidated basis, affecting the results of
operations were:

Selling and administrative expenses decreased by $8.6 million, or 10%, to $74.5
million in fiscal year 2002 from fiscal year 2001 as a result of decreased
commissions and incentives due to the lower sales, the Company's cost cutting
initiatives and reduced financial reporting system expenses in fiscal 2002.
Selling and administrative expenses, expressed as a percentage of sales, were
5.1% in fiscal 2002 and 4.4% in fiscal 2001.

Depreciation and amortization decreased by $2.4 million, or 10%, to $22.2
million in fiscal 2002. The decrease was attributable to a $3.0 million
reduction in goodwill amortization due to the effect of new rules on accounting
for goodwill, which eliminated amortization of goodwill in favor of annual
impairment tests which the Company adopted at the beginning of fiscal 2002 (see
"Critical Accounting Policies," above). This was partially offset by increased
depreciation of fixed assets.

The Company incurred other expense of $3.5 million in fiscal 2002, due to a $2.1
million charge for the early payment of the Company's 7.92% Senior Notes, which
was previously presented as an extraordinary item, along with expenses incurred
in conjunction with the initial and subsequent transactions under the Company's
new Securitization Program and other sundry expenses.

In fiscal 2001, the Company recognized a pre-tax gain of $6.3 million on the
sale of securities that had been previously written off in 1997, partially
offset by a $0.7 million write down of an investment in marketable securities,
resulting in a net pre-tax gain of $5.6 million. In fiscal 2001, the Company
also recognized a pre-tax gain of $4.2 million on the sale of the Company's
interest in a real estate partnership.


43


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Fiscal Year 2002 (52 weeks) Compared to Fiscal Year 2001 (52 weeks)--Continued
- -------------------------------------------------------------------

Results of Operations - Other--Continued
- -----------------------------

The foreign exchange loss in fiscal 2002 was $0.5 million compared to $0.2
million in fiscal 2001. The increase was a result of unfavorable currency
movements in the Uruguayan and European currency markets. To reduce the
potential adverse impact from foreign currency changes on the Company's foreign
currency receivables and firm commitments, the Company utilizes foreign currency
option and forward contracts, when required, that generally settle on the last
weekday of each quarter.

Interest expense decreased by $7.3 million, or 62%, to $4.5 million in fiscal
2002. The decrease was attributable to reduced working capital requirements
resulting from the sales decline, as well as from the early repayment on March
5, 2002 of the remaining $30.0 million of 7.92% Senior Notes in contemplation of
the lower cost accounts receivable Securitization Program. The Securitization
Program, costs of which are reflected in other expense (see above), also
eliminated higher cost borrowings under the revolving credit facility.
Throughout fiscal 2002, the Company has also benefited from significantly lower
market rates for financing, partially offset by an increase in rates in Uruguay.

The Company's tax benefit in 2002 reflected an effective tax rate of 30.9% of
its financial reporting pre-tax loss from continuing operations compared to a
2001 tax provision which reflected an effective tax rate of 39.6% of its
financial reporting pre-tax income from continuing operations. The low effective
tax benefit in fiscal 2002 was primarily due to 2002 foreign losses for which no
tax benefit was provided.

The $4.3 million gain, net of taxes, from discontinued operations arose from the
Company's sale on November 30, 2001 of Autologic, the Company's 59% owned
publicly-held subsidiary, that comprised the Company's Electronic Publication
and Typesetting segment, to 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 net gain was comprised of a $4.5 million gain
on the sale, including a tax benefit of $1.7 million (resulting from a taxable
loss versus a gain for financial statement purposes), partially offset by a loss
from Autologic's operations through the disposal date of $0.2 million (compared
to a loss of $0.8 million in fiscal 2001).

The $31.9 million charge to earnings recorded as a cumulative effect of a change
in accounting arose from the required adoption, as of the beginning of fiscal
2002, of SFAS No. 142, "Goodwill and Other Intangible Assets," under which
goodwill and other intangibles with indefinite lives are no longer amortized,
but instead are subject to annual testing using fair value methodology. The
Company engaged independent valuation firms to assist in the determination of
the impairment that may have existed in the $39.8 million of goodwill recorded
as of the beginning of the fiscal year, November 5, 2001. The valuation firms
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. The result of testing goodwill for impairment was a
non-cash charge of $31.9 million. The total remaining goodwill of the Company at
November 3, 2002 was $9.0 million.


44


ITEM 7. 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 customers of $18.9 million and $11.5 million at
November 2, 2003 and November 3, 2002, respectively, increased by $18.4 million
to $62.1 million in fiscal 2003. Unrestricted cash and cash equivalents
increased to $43.2 million at November 2, 2003 from $32.2 million at November 3,
2002.

The cash provided by operating activities of continuing operations in fiscal
2003 was $36.2 million compared to $108.5 million and $89.3 million in fiscal
years 2002 and 2001, respectively.

The cash provided by operating activities in fiscal 2003, exclusive of changes
in operating assets and liabilities, was $35.5 million, as the Company's net
income of $4.8 million included non-cash charges primarily for depreciation and
amortization of $24.3 million and accounts receivable provisions of $6.2
million. In fiscal 2002, operating activities, exclusive of changes in operating
assets and liabilities, produced $33.4 million of cash, as the Company's net
loss of $32.8 million included non-cash charges of $31.9 million for goodwill
impairment, depreciation and amortization of $22.2 million, accounts receivable
provisions of $10.2 million, a deferred income tax provision of $3.9 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.
In fiscal 2001, operating activities, exclusive of changes in operating assets
and liabilities, produced $32.9 million of cash, as the Company's net income of
$5.8 million included non-cash charges primarily for depreciation and
amortization of $24.6 million, accounts receivable provisions of $8.5 million
and a deferred income tax provision of $2.6 million, partially offset by gains
on securities of $5.6 million and a $4.2 million gain on the sale of a
partnership interest.

Changes in operating assets and liabilities in 2003 produced $0.7 million of
cash, net, principally due to cash provided by increases in accrued expenses of
$14.6 million, proceeds from the Securitization Program of $10.0 million,
increases in deferred income and other liabilities of $8.6 million, and an
increase in income taxes payable of $4.0 million, partially offset by an
increase in the level of accounts receivable of $28.6 million and inventory of
$7.7 million. In fiscal 2002, changes in operating assets and liabilities
produced $75.1 million of cash, net, principally due to the proceeds received
under the then new Securitization Program of $60.0 million, an increase in the
level of accounts payable of $40.1 million and a decrease in inventories of $6.5
million, partially offset by a $18.7 million decrease in accrued expenses, an
increase in the level of accounts receivable of $8.6 million and a $6.9 million
decrease in the net income tax liability. In fiscal 2001, changes in operating
assets and liabilities produced $56.4 million of cash, net, principally due to
cash provided by decreases in the level of accounts receivable of $61.9 million
and inventories of $28.4 million, partially offset by decreases of $29.6 million
in accounts payable and $6.7 million in the income tax liability.

The cash used for investing activities in 2003 was $17.4 million, principally
due to purchases of property, plant and equipment totaling $18.0 million. In
fiscal 2002, the cash provided by investing activities was $13.5 million,
primarily due to the proceeds received from the sale of Autologic of $24.2
million and distributions from a joint venture of $3.3 million, partially offset
by purchases of plant, property and equipment totaling $14.7 million. In fiscal
2001, the cash used for investing activities was $16.7 million, primarily due to
purchases of property, plant and equipment totaling $27.1 million, partially
offset by the net cash provided by investment transactions of $5.3 million and
$4.0 million proceeds from the sale of a partnership interest.


45


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Liquidity and Capital Resources--Continued
- -------------------------------

The cash provided by financing activities in fiscal 2003 of $0.1 million
primarily resulted from a $1.5 million increase in bank loans, offset by
payments of long-term debt totaling $1.5 million. In 2002, the cash used for
financing activities was $95.7 million, primarily resulting from net repayments
of bank loans totaling $62.3 million and $33.5 million in payments of long-term
debt, including the early payment of the $30.0 million outstanding 7.92% Senior
Notes. In fiscal 2001, the cash used for financing activities was $76.0 million,
resulting primarily from net repayments of bank loans totaling $77.6 million and
a $13.7 million payment of long-term debt, partially offset by the proceeds from
new long-term debt of $15.1 million.

Off-Balance Sheet Arrangements
- ------------------------------

The Company does not have any "off-balance sheet arrangements" (as such term is
defined in Item 303 of Regulation S-K).

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 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 $8.1 million has been incurred and capitalized to date. The
Company has no other material capital commitments.

The following table summarizes the Company's contractual cash obligations and
other commercial commitments at November 2, 2003:




Contractual Cash Obligations Payments Due By Period
------------------------------------------------------------------------------------
Less than 1- 3 3 - 5 After 5
Total 1 year years years years
----- --------- ----- ------ -------
(In thousands)

Term Loan $14,469 $371 $839 $987 $12,272
Notes Payable to Banks 4,062 4,062 - - -
------- ------- ------- ------- -------
Total Debt 18,531 4,433 839 987 12,272
Accrued Insurance 4,098 4,098
Operating Leases (a) 49,356 18,619 21,032 6,704 3,001
------- ------- ------- ------- -------
Total Contractual Cash Obligations $71,985 $23,052 $25,969 $7,691 $15,273
======= ======= ======= ======= =======


(a) See Note P of Notes to Consolidated Financial Statements.


46


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued



Commitments--Continued
- -----------
Amount Expected by
Other Contingent Commitments Commitment Expiration Period
- ---------------------------- ---------------------------------------------------
Less than 1-3
Total 1 year years
----- --------- -----
(In thousands)

Lines of Credit, available $7,029 $7,029
Revolving Credit Facility, available 40,000 40,000
Securitization Program, available 30,000 $30,000
Standby Letters of Credit, outstanding 224 224 -
------- ------- -------
Total Commercial Commitments $77,253 $47,253 $30,000
======= ======= =======


The Company believes that its current financial position, working capital,
future cash flows, credit lines and accounts receivable Securitization Program
are sufficient to fund its presently contemplated operations in fiscal 2004 and
satisfy its debt obligations.

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 November 2, 2003, TRFCO had
purchased from Volt Funding a participation interest of $70.0 million (increased
to $80 million on November 14, 2003 and reduced to $65 million on January 14,
2004) out of a pool of approximately $189.3 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.

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.


47


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

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 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 incurred by
TRFCO on the issuance of its 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 debt rating of its two-year revolving Credit Facility was
"BBB-" with a neutral rating outlook. At November 2, 2003, the Company was in
compliance with all requirements of its Securitizaton Program.

The Company has been notified by TRFCO that a request to increase the
securitization facility to $150 million in anticipation of increased revenue, as
well as an extension of the term, has been approved and will be finalized in the
near future.

Credit Lines
- ------------

At November 2, 2003, the Company had credit lines with domestic and foreign
banks that provide for borrowings and letters of credit up to an aggregate of
$51.1 million, including a $40.0 million two-year 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. 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 November 2, 2003, the borrowing base was approximately
$40.0 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 debt rating provided by a nationally
recognized rating agency. Based upon the Company's leverage ratio and debt
rating at November 2, 2003, if a three-month LIBO rate was the interest rate
option selected by the Company, borrowings would have borne


48


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

Credit Lines--Continued
- ------------

interest at the rate of 3.0% per annum. At November 2, 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 November 2, 2003
was $234.3 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. 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 November 2, 2003, the Company was in compliance with all covenants in the
Credit Agreement and believes it will be in compliance throughout its remaining
term.

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 November 2, 2003, four of those guarantors have pledged approximately $52.4
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 above) as collateral
security for its own obligations under the Credit Facility.

The Company has requested, and expects to obtain, from the participating banks
an extension of the term of the Credit Facility beyond April 2004, but at a
reduced amount in conjunction with our increase in the Securitization Program
(discussed above). The Company's intention is to use the facility for short-term
borrowings and to hedge foreign currency exposures in place of currency options
and exchange contracts, when borrowing in the foreign currency provides a
low-cost alternative.

Summary
- -------

The Company believes that its current financial position, working capital,
future cash flows from operations, credit lines and accounts receivable
Securitization Program will be sufficient to fund its presently contemplated
operations and satisfy its debt obligations in fiscal 2004.


49


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

New Accounting Pronouncements
- -----------------------------

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. 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 did 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. The
Company's adoption of SFAS No. 148 did 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's adoption of SFAS No. 149 did not
have a material impact on the Company's consolidated financial position or
results of operations.


50


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued

New Accounting Pronouncements--Continued
- -----------------------------

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity", to provide new
guidance with respect to how an issuer classifies and measures these items in
its financial statements. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. The
Company's adoption of SFAS No. 150 in the fourth quarter did not have an impact
on the Company's consolidated financial position or results of operations.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential economic loss that may result from adverse changes
in the fair value of financial instruments. The Company`s earnings, cash flows
and financial position are exposed to market risks relating to fluctuations in
interest rates and foreign currency exchange rates. The Company has cash and
cash equivalents on which interest income is earned at variable rates. The
Company also has credit lines with various domestic and foreign banks, which
provide for borrowings and letters of credit, as well as a $100 million accounts
receivable securitization program to provide the Company with additional
liquidity to meet its short-term financing needs.

The interest rates on these borrowings and financing are variable and,
therefore, interest and other expense and interest income are affected by the
general level of U.S. and foreign interest rates. Based upon the current levels
of cash invested, notes payable to banks and utilization of the securitization
program, on a short-term basis, as noted below in the tables, a hypothetical
100-basis-point (1%) increase or decrease in interest rates would increase or
decrease its annual net interest income/expense and securitization costs by
$120,000 and $240,000, respectively.

The Company has a term loan, as noted in the table below, which consists of
borrowings at fixed interest rates, and the Company's interest expense related
to these borrowings is not affected by changes in interest rates in the near
term. The fair value of the fixed rate term loan was approximately $15.0 million
at November 2, 2003. This fair value was calculated by applying the appropriate
fiscal year-end interest rate supplied by the lender to the Company's present
stream of loan payments.

The Company holds short-term investments in mutual funds for the Company's
deferred compensation plan. At November 2, 2003, the total market value of these
investments was $4.1 million, all of which are being held for the benefit of
participants in a non-qualified deferred compensation plan with no risk to the
Company.

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. As
of November 2, 2003, the total of the Company's net investment in foreign
operations was $13.3 million. The Company attempts to reduce these risks by
utilizing foreign currency option and exchange contracts, as well as borrowing
in foreign currencies, to hedge the adverse impact on foreign currency net
assets when the dollar strengthens against the related foreign currency. As of
November 2, 2003, the total of the Company's foreign exchange options was $10.0
million, leaving a balance of net foreign assets exposed of $3.3


51


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK--Continued

million. The amount of risk and the use of foreign exchange instruments
described above are not material to the Company's financial position or results
of operations and the Company does not use these instruments for trading or
other speculative purposes. Based upon the current levels of net foreign assets,
a hypothetical weakening or strengthening of the U.S. dollar against these
currencies at November 2, 2003 by 10% would result in a pretax gain or loss of
$1.3 million and $0.3 million, respectively, related to these positions.

The tables below provide information about the Company's financial instruments
that are sensitive to either interest rates or exchange rates at November 2,
2003. For cash and debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates. For foreign
exchange agreements, the table presents the currencies, notional amounts and
weighted average exchange rates by contractual maturity dates. The information
is presented in U.S. dollar equivalents, which is the Company's reporting
currency.




Interest Rate Market Risk Payments Due By Period as of November 2, 2003
- ------------------------- ---------------------------------------------------------------
Less than 1-3 3-5 After 5
Total 1 year Years Years Years
------- -------- ------- ------- -------
(Dollars in thousands of US$)

Cash and Cash Equivalents
Money Market and Cash Accounts $62,057 $62,057
Weighted Average Interest Rate 0.8% 0.8%
------- -------
Total Cash & Cash Equivalents $62,057 $62,057
======= =======
Securitization Program
Accounts Receivable Securitization $70,000 $70,000
Finance Rate 2.6% 2.6%
------- -------
Securitization Program $70,000 $70,000
======= =======

Interest Rate Market Risk Payments Due By Period as of November 2, 2003
- ------------------------- ---------------------------------------------------------------

Less than 1 - 3 3 - 5 After 5
Total 1 Year Years Years Years
------- -------- ------- ------- -------
(Dollars in thousands of US$)
Debt
Term Loan (1) $14,469 $371 $839 $988 $12,271
Interest Rate 8.2% 8.2% 8.2% 8.2% 8.2%

Notes Payable to Banks $4,062 $4,062
Weighted Average Interest Rate 9.9% 9.9% - - -
------- ------- ------- ------- -------
Total Debt $18,531 $4,433 $839 $988 $12,271
======= ======= ======= ======= =======



52



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK-- Continued





Foreign Exchange Market Risk
- ---------------------------- Contract Values
--------------- Fair Value
Less than Option Premium
Total 1 Year (1)
------- ---------- --------------
(Dollars in thousands of US $)

Option Contracts
British Pound Sterling to U.S.$ $6,731 $6,731 $115
Contractual Exchange Rate 1.68 1.68

Euro to British Pounds Sterling $1,161 $1,161 $19
Contractual Exchange Rate 0.69 0.69

Canadian $ to U.S.$ $2,067 $2,067 $29
Contractual Exchange Rate 1.45 1.45

Total Option Contracts $9,959 $9,959 $163
======= ======= =======


(1) Represents the cost of the options purchased on October 31, 2003.


53


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


REPORT OF INDEPENDENT AUDITORS


Board of Directors
Volt Information Sciences, Inc.


We have audited the accompanying consolidated balance sheets of Volt Information
Sciences, Inc. and subsidiaries as of November 2, 2003 and November 3, 2002, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended November 2, 2003. Our
audits also included the financial statement schedule listed in the Index at
Item 15(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Volt
Information Sciences, Inc. and subsidiaries at November 2, 2003 and November 3,
2002, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended November 2, 2003, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

As discussed in Note H to the consolidated financial statements, Volt
Information Sciences, Inc. and subsidiaries adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," at the
beginning of fiscal 2002.

Ernst & Young LLP


December 22, 2003



54





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November November
2, 2003 3, 2002
--------- --------
ASSETS (Dollars in thousands)

CURRENT ASSETS
Cash and cash equivalents including restricted cash of $18,870 (2003) and
$11,458 (2002)--Notes A and O $62,057 $43,620
Short-term investments--Notes A and C 4,149 3,754
Trade accounts receivable less allowances of $10,498 (2003) and $10,994 (2002)
--Notes A, B, F and Schedule II 313,946 300,670
Inventories--Notes A and D 37,357 29,690
Recoverable income taxes--Notes A and G 2,596 6,552
Deferred income taxes--Notes A and G and Schedule II 8,722 8,343
Prepaid expenses and other assets 16,132 15,212
-------- --------
TOTAL CURRENT ASSETS 444,959 407,841

Investment in securities--Notes A and C and Schedule II 193 52
Property, plant and equipment-net--Notes A, F and L 82,452 89,294
Deposits and other assets 2,107 3,328
Intangible assets-net of accumulated amortization of $1,349 (2003) and
$1,258 (2002)--Notes A and H 8,982 9,075
-------- --------

TOTAL ASSETS $538,693 $509,590
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Notes E and F $4,062 $2,424
Current portion of long-term debt--Note F 371 1,524
Accounts payable--Note O 153,979 154,054
Accrued wages and commissions--Note N 45,834 39,529
Accrued taxes other than income taxes 16,741 18,525
Other accruals 14,673 8,276
Deferred income and other liabilities 27,665 19,009
-------- --------
TOTAL CURRENT LIABILITIES 263,325 243,341

Accrued insurance--Note A 4,098
Long-term debt--Note F 14,098 14,469
Deferred income taxes--Notes A and G 15,252 14,743

STOCKHOLDERS' EQUITY--Notes A, B, C, E, F, G, K, M and O and Schedule II
Preferred stock, par value $1.00; Authorized--500,000 shares; issued--none
Common stock, par value $.10; Authorized--30,000,000 shares; issued--
15,220,415 shares (2003) and 15,217,415 shares (2002) 1,522 1,522
Paid-in capital 41,091 41,036
Retained earnings 199,723 194,962
Accumulated other comprehensive loss (416) (483)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 241,920 237,037
-------- --------
COMMITMENTS--Note P

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $538,693 $509,590
======== ========

See Notes to Consolidated Financial Statements



55




VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
----------------------------------------------
November November November
2, 2003 3, 2002 (1,2) 4, 2001 (1)
-------- ------------- -----------
(In thousands, except per share data)


NET SALES $1,609,857 $1,467,786 $1,898,681

COSTS AND EXPENSES:
Cost of sales 1,502,148 1,370,976 1,778,491
Selling and administrative 71,607 74,514 83,136
Depreciation and amortization 24,331 22,166 24,582
---------- ---------- ----------
1,598,086 1,467,656 1,886,209
---------- ---------- ----------

OPERATING PROFIT 11,771 130 12,472

OTHER INCOME (EXPENSE):
Interest income 708 851 877
Other expense-net--Notes B and J (2,661) (3,462) (18)
Gain on securities-net--Note C 5,552
Gain on sale of partnership interest--Note J 4,173
Foreign exchange gain (loss)-net 299 (477) (158)
Interest expense (2,070) (4,549) (11,880)
---------- ---------- ----------
Income (loss) from continuing operations before income taxes 8,047 (7,507) 11,018
Income tax (provision) benefit--Notes A and G (3,286) 2,320 (4,360)
---------- ---------- ----------
Income (loss) from continuing operations before items shown below 4,761 (5,187) 6,658
Discontinued operations, net of taxes--Note J 4,310 (814)
Cumulative effect of a change in accounting--Note H
Goodwill impairment (31,927)
---------- ---------- ----------

NET INCOME (LOSS) $4,761 ($32,804) $5,844
========== ========== ==========

Per Share Data
Basic and Diluted: --------------
Income (loss) from continuing operations before items shown
below $0.31 ($0.34) $0.44
Discontinued operations 0.28 (0.06)
Cumulative effect of a change in accounting (2.10)
---------- ---------- ----------
Net income (loss) $0.31 ($2.16) $0.38
========== ========== ==========
Weighted average number of shares-basic--Notes A and I 15,218 15,217 15,212
========== ========== ==========
Weighted average number of shares-diluted--Notes A and I 15,225 15,217 15,244
========== ========== ==========


Note 1 - As previously announced, the Company has changed the method of
reporting revenues of its Professional Employer Organization ("PEO")
subsidiary, Shaw & Shaw, from gross billing to a net revenue basis in
fiscal year 2003. Accordingly, reported PEO revenues and related cost
of sales for fiscal years 2002 and 2001 have been reduced by $20.1
million and $33.6 million, respectively, with no effect on operating
profit or the net results to the Company.

Note 2 - Pursuant to the Company's previously announced adoption of SFAS
No.145, results for fiscal year 2002 have been restated to give effect
to the reclassification of a charge of $2.1 million arising from March
2002 early payment of the Company's 7.92% Senior Notes to Other
Expense, previously presented as an extraordinary item.

See Notes to Consolidated Financial Statements.


56




VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


Accumulated Other
Comprehensive (Loss) Income
----------------------------
Foreign Unrealized Comprehensive
Common Stock Currency Gain (Loss) Income
$.10 Par Value Paid-In Retained Translation On Marketable (Loss)
--------------------- Capital Earnings Adjustment Securities
Shares Amount -------- -------- ----------- ------------- -------------
(Dollars in thousands)


Balance at November 3, 2000 15,208,015 $1,521 $40,862 $221,922 ($550) ($400)



Stock options exercised, net of tax
benefit of $3 7,650 1 140
Unrealized foreign currency translation
adjustment-net of taxes of $36 82 $82
Unrealized loss on marketable securities
- -
net of taxes of $24 (38) (38)
Reclassification adjustment for loss
included
in net income-net of taxes of $282 428 428
Net income for the year 5,844 5,844
---------- ------- ------ ------- ------ ------ --------
Balance at November 4, 2001 15,215,665 1,522 41,002 227,766 (468) (10) $6,316
========

Stock options exercised, net of tax
benefit of $3 1,750 34
Unrealized foreign currency translation
adjustment-net of tax benefit of $10 (22) ($22)
Unrealized gain on marketable securities
- - net of taxes of $11 17 17
Net loss for the year (32,804) (32,804)
---------- ------- ------ ------- ------ ------ --------
Balance at November 3, 2002 15,217,415 1,522 41,036 194,962 (490) 7 ($32,809)
========

Stock options exercised, net of a
diminutive
tax benefit 3,000 55
Unrealized foreign currency translation
Adjustment-net of tax benefit of $8 (18) ($18)
Unrealized gain on marketable securities
- - net of taxes of $56 85 85
Net income for the year 4,761 4,761
---------- ------- ------ ------- ------ ------ --------
Balance at November 2, 2003 15,220,415 $1,522 $41,091 $199,723 ($508) $92 $4,828
========== ======= ====== ======= ====== ====== ========

There were no shares of preferred stock issued or outstanding in any of the reported periods.

See Notes to Consolidated Financial Statements.



57





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
----------------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)


CASH PROVIDED BY (APPLIED TO) OPERATING ACTIVITIES
Net income (loss) $4,761 ($32,804) $5,844
Adjustments to reconcile net income (loss) to cash provided by
operating activities
Discontinued operations (4,310) 814
Loss on early payment of debt 2,093
Cumulative effect of a change in accounting - goodwill impairment 31,927
Depreciation and amortization 24,331 22,166 24,582
Equity in net (income) loss of joint ventures (25) 49
Gain on sale of partnership interest (4,173)
Gain on securities-net (5,552)
Accounts receivable provisions 6,227 10,188 8,462
(Gain) loss on foreign currency translation (10) 231 64
Loss on dispositions of property, plant and equipment 151 100 118
Deferred income tax expense 82 3,898 2,620
Other (98) 100
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (28,612) (8,641) 61,878
Proceeds from securitization program 10,000 60,000
(Increase) decrease in inventories (7,667) 6,496 28,399
(Increase) decrease in prepaid expenses and other assets (27) (1,137) 3,229
Decrease in deposits and other assets 687 1,318 2,153
(Decrease) increase in accounts payable (864) 40,076 (29,603)
Increase (decrease) in accrued expenses 14,599 (18,655) 449
Increase (decrease) in deferred income and other liabilities 8,560 2,505 (3,520)
Increase (decrease) in recoverable income taxes 3,957 (6,866) (6,655)
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,175 108,462 89,258
------- ------- -------



58





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
Year Ended
----------------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)

CASH PROVIDED BY (APPLIED TO) INVESTING ACTIVITIES
Sales of investments 870 840 7,326
Purchases of investments (833) (1,089) (2,001)
Distributions from joint ventures 49 3,271
Acquisitions (76)
Net proceeds from sale of partnership interest 4,017
Proceeds from disposals of property, plant and equipment 469 633 1,174
Purchases of property, plant and equipment (17,990) (14,692) (27,112)
Proceeds from sale of subsidiary 24,233
Other 317 (5)
------- ------- -------
NET CASH (APPLIED TO) PROVIDED BY INVESTING ACTIVITIES (17,435) 13,513 (16,677)
------- ------- -------
CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES
Proceeds from long-term debt 15,100
Payment of long-term debt (1,524) (33,476) (13,674)
Exercises of stock options 55 34 141
Increase (decrease) in notes payable-bank 1,523 (62,306) (77,568)
------- ------- -------

NET CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES 54 (95,748) (76,001)
------- ------- -------

Effect of exchange rate changes on cash (357) (1,081) (304)
------- ------- -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM CONTINUING
OPERATIONS 18,437 25,146 (3,724)

Net decrease in cash and cash equivalents from discontinued operations (11,901)
------- ------- -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,437 25,146 (15,625)

Cash and cash equivalents, including restricted cash, beginning of year 43,620 18,474 34,099
------- ------- -------

CASH AND CASH EQUIVALENTS, INCLUDING RESTRICTED CASH, END OF YEAR $62,057 $43,620 $18,474
======= ======= =======

SUPPLEMENTAL INFORMATION

Cash paid during the year:
Interest expense $2,131 $5,357 $12,624
Income taxes $2,360 $3,200 $8,012

See Notes to Consolidated Financial Statements



59


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A--Summary of Significant Accounting Policies

Business: The Company operates in two major businesses, Staffing Services and
Telecommunications and Information Solutions, consisting of four operating
segments: Staffing Services; Telephone Directory; Telecommunications Services
and Computer Systems.

Fiscal Year: The Company's fiscal year ends on the Sunday nearest October 31.
The 2001 through 2003 fiscal years consisted of 52 weeks.

Consolidation: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated upon consolidation. The Company accounts for the securitization
of accounts receivables in accordance with Financial Accounting Standards Board
("FASB") Statement No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" (see Note B). In January 2003, the
Financial Accounting Standards Board ("FASB") issued FASB Interpretation No.46,
"Consolidation of Variable 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.

Use of Estimates: The preparation of financial statements in conformity with
accounting principles generally accepted in the United States, requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.

Stock-Based Compensation: The Company has elected to follow APB Opinion 25,
"Accounting for Stock Issued to Employees," to account for its stock options
under which no compensation cost is recognized because the option exercise price
is 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
for FSAB Statement No. 123," net income and earnings per share, on a pro forma
basis, would have been:


2003 2002 2001
------- -------- --------

Net income (loss) as reported $4,671 ($32,804) $5,844
Pro forma compensation expense, net of taxes (67) (309) (501)
------- -------- --------
Pro forma net income (loss) (in thousands) $4,604 ($33,113) $5,343
======= ======== ========
Net income (loss) as reported per share-basic and diluted $0.31 ($2.16) $0.38
Pro forma compensation expense, net of taxes per share-basic and diluted (0.01) (0.02) (0.03)
------- -------- --------
Pro forma net income (loss) per share-basic and diluted $0.30 ($2.18) $0.35
======= ======== ========


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, 2002 and 2001, respectively:
risk-free interest rates of 2.0%, 2.7% and 5.0%, respectively; expected
volatility of .50, .52 and .65, respectively; an expected life of the options of
five years; and no dividends. The weighted average fair value of stock options
granted during fiscal years 2003, 2002 and 2001 were $6.59, $10.59 and $13.00,
respectively.


60


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

Revenue Recognition: - The Company derives its revenues from several sources.
The revenue recognition methods, which are consistent with those prescribed in
Staff Accounting Bulletin 101 ("SAB 101"), entitled "Revenue Recognition in
Financial Statements," are described below in more detail for the significant
types of revenue within each of its segments.

Staffing Services:
Traditional Staffing: In fiscal 2003, this revenue comprised approximately
74% of consolidated sales. Sales are derived from the Company's Staffing
Solutions Group supplying its own temporary personnel to its customers, for
which the Company assumes the risk of acceptability of its employees to its
customers, and has credit risk for collecting its billings after it has
paid its employees. The Company reflects revenues for these services on a
gross basis in the period the services are rendered.

Managed Services: In fiscal 2003, this revenue comprised approximately 5%
of consolidated sales. Sales are generated by the Company's E-Procurement
Solutions' subsidiary, ProcureStaff, and for certain contracts, sales are
generated by the Company's Staffing Solutions Group's managed services
operations. The Company receives an administrative fee for arranging for,
billing for and collecting the billings related to other staffing companies
("associate vendors") who have supplied personnel to the Company's
customers. The administrative fee is either charged to the customer or
subtracted from the Company payment to the associate vendor. The customer
is typically responsible for assessing the work of the associate vendor,
who has responsibility for the acceptability of their personnel to the
customer, and in most instances the customer and associate vendor have
agreed to the Company not paying the associate vendor until the customer
pays the Company. Based upon the revenue recognition principles prescribed
in Emerging Issues Task Force 99-19 ("EITF 99-19"), entitled "Reporting
Revenue Gross as a Principal versus Net as an Agent", revenue for these
services, where the customer has agreed, is recognized net of associated
costs in the period the services are rendered.

Outsourced Projects: In fiscal 2003, this revenue comprised approximately
4% of consolidated sales. Sales are derived from the Company's Information
Technology Solutions' operation providing outsource services for a customer
in the form of project work, for which the Company is responsible for
deliverables. The Company's employees perform the services and the Company
has credit risk for collecting its billings. Revenue for these services is
recognized on a gross basis in the period the services are rendered, and
when the Company is responsible for project completion, revenue is
recognized when the project is complete and the customer has approved the
work.

Shaw & Shaw: In fiscal 2003, this revenue comprised less than 1% of
consolidated sales, due to the Company's reporting of these revenues on a
net basis. Sales are generated by the Company's Shaw & Shaw subsidiary, for
which the Company provides professional employer organizational services
("PEO") to certain customers. Generally, the customers transfer their
entire workforce or employees of specific departments or divisions to the
Company, but the customers maintain control over the day-to-day job duties
of the employees. Based upon the revenue recognition principles prescribed
in EITF 99-19, effective with the Company's second fiscal quarter of 2003,
the Company has changed its method of reporting revenue from these services
from a gross basis to a net basis. 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.


61


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

Revenue Recognition: --Continued
- -------------------

Telephone Directory:
Directory Publishing: In fiscal 2003, this revenue comprised approximately
3% of consolidated sales. Sales are derived from the Company's sales of
telephone directory advertising for books it publishes as an independent
publisher or for a telephone company in Uruguay. The Company's employees
perform the services and the Company has credit risk for collecting its
billings. Revenue for these services is recognized on a gross basis in the
period the books are printed and delivered.

Ad Production: In fiscal 2003, this revenue comprised approximately 1% of
consolidated sales. Sales are generated when the Company performs design
and production services, and database management for other publishers'
telephone directories. The Company's employees perform the services and the
Company has credit risk for collecting its billings. Revenue for these
services is recognized on a gross basis in the period the Company has
completed its ad production work and upon customer acceptance.

Telecommunications Services:
Construction: In fiscal 2003, this revenue comprised approximately 3% of
consolidated sales. Sales are derived from the Company supplying aerial and
underground construction services related to telecommunications and cable
operations. The Company's employees perform the services, and the Company
takes title to all inventory, and has credit risk for collecting its
billings. The Company relies upon the principles in Statement of Position
81-1 ("SOP 81-1"), entitled "Accounting for Performance of
Construction-Type Contracts," using the completed-contract method, to
recognize revenue on a gross basis upon customer acceptance of the project.

Non-Construction: In fiscal 2003, this revenue comprised approximately 4%
of consolidated sales. Sales are derived from the Company performing
design, engineering and business systems integrations work. The Company's
employees perform the services and the Company has credit risk for
collecting its billings. Revenue for these services is recognized on a
gross basis in the period in which services are performed, and if
applicable, any completed units are delivered and accepted by the customer.

Computer Systems:
Database Access: In fiscal 2003, this revenue comprised approximately 3% of
consolidated sales. Sales are derived from the Company granting access to
its proprietary telephone listing databases to telephone companies,
inter-exchange carriers and non-telco enterprise customers. The Company
uses its own databases and has credit risk for collecting its billings. The
Company recognizes revenue on a gross basis in the period in which the
customers access the Company's databases.

IT Maintenance: In fiscal 2003, this revenue comprised approximately 2% of
consolidated sales. Sales are derived from the Company providing hardware
maintenance services to the general business community, including customers
who have our systems. The Company uses its own employees and inventory in
the performance of the services, and has credit risk for collecting its
billings. Revenue for these services is recognized on a gross basis in the
period in which the services are performed, contingent upon customer
acceptance.


62


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

Revenue Recognition: --Continued
- --------------------

Computer Systems--Continued:
Telephone Systems: In fiscal 2003, this revenue comprised approximately 1%
of consolidated sales. Sales are derived from the Company providing
telephone operator services-related systems and enhancements to existing
systems, equipment and software to customers. The Company uses its own
employees and has credit risk for collecting its billings. The Company
relies upon the principles in Statement of Position 97-2 ("SOP 97-2"),
entitled "Software Revenue Recognition" and Emerging Issues Task Force
00-21 ("EITF 00-21"), entitled "Revenue Arrangements with Multiple
Deliverables" to recognize revenue on a gross basis upon customer
acceptance of each part of the system based upon its fair value.

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.

Cash Equivalents: Cash equivalents consist of investments in short-term, highly
liquid securities having an initial maturity of three months or less.

Investments: The Company determines the appropriate classification of marketable
equity and debt securities at the time of purchase and re-evaluates its
designation as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost. Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value with the unrealized gains and losses, net
of tax, reported as a separate component of stockholders' equity. Losses
considered to be other than temporary are charged to earnings.

Inventories: Accumulated unbilled costs on contracts related to performing
services are carried at the lower of actual cost or realizable value (see Note
D).

Long-Lived and Intangible Assets: The Company, in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets," and SFAS No. 144, "Accounting for
Impairment on Disposal of Long-lived Assets," reviews for impairment long-lived
assets and certain identifiable intangibles annually in the Company's second
fiscal quarter and whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable (see Note H).


63


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

Property, Plant and Equipment: Depreciation and amortization are provided on the
straight-line and accelerated methods at rates calculated to write off the cost
of the assets over their estimated useful lives. Fully depreciated assets are
retained in property and depreciation accounts until they are removed from
service. In the case of disposals, assets and related depreciation are removed
from the accounts, and the net amounts less proceeds from disposal, are included
in income. Maintenance and repairs are expensed as incurred. The assets are
depreciated over the following periods:
Buildings 25 to 31-1/2 years
Machinery and equipment 3 to 15 years
Leasehold improvements length of lease or life of the asset,
whichever is shorter
Enterprise Resource Planning system 5 to 7 years



Property, plant and equipment consisted of: November November
2, 2003 3, 2002
-------- --------
(In thousands)

Land and buildings $33,847 $33,797
Machinery and equipment 114,167 102,301
Leasehold improvements 10,818 9,049
Enterprise Resource Planning system 33,371 31,916
-------- -------
192,203 177,063
Less allowances for depreciation and amortization 109,751 87,769
-------- -------
$82,452 $89,294
======== =======


A term loan is secured by a deed of trust on land and buildings with a carrying
amount at November 2, 2003 of $11.0 million (see Note F).

Primary Insurance Casualty Program: The Company is insured with a highly rated
insurance company under a program that provides primary workers' compensation,
employer's liability, general liability and automobile liability insurance under
a loss sensitive program. In certain mandated states, the Company purchases
workers' compensation insurance through participation in state funds. The
experience-rated premiums in these state plans relieve the Company of additional
liability. Initial premium accruals are established based upon the underlying
exposure, such as the amount and type of labor utilized, number of vehicles,
etc. The Company establishes accruals utilizing actuarial methods to estimate
the undiscounted future cash payments that will be made to satisfy the claims,
including an allowance for incurred-but-not-reported claims. This process also
includes establishing loss development factors, based on the historical claims
experience of the Company and the industry, and applying those factors to
current claims information to derive an estimate of the Company's ultimate
premium liability. In preparing the estimates, the Company also considers the
nature and severity of the claims, analyses provided by third party actuaries,
as well as current legal, economic and regulatory factors. The insurance
policies have various premium rating plans that establish the ultimate premium
to be paid. Prior to March 31, 2002, the amount of the additional or return
premium was finalized. Subsequent thereto, adjustments to premium will be made
based upon the level of claims incurred at a future date up to three years after
the end of the respective policy period. For the policy year ended March 31,
2003, a maximum premium has been predetermined. At November 2, 2003, the
Company's liability for the plan year ended


64


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

March 31, 2003 was $4.3 million ($4.1 million is due in 2006) and the Company's
prepayment for the plan year ending March 31, 2004 was $2.5 million.

Reclassification: Certain amounts in fiscal years 2002 and 2001 have been
reclassified to conform to the 2003 presentation. Pursuant to Company's adoption
of Statement of Financial Accounting Standards ("SFAS") No. 145, results for the
fiscal year 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. In addition, as previously reported, the
Company has changed the method of reporting the revenues of its Professional
Employer Organization ("PEO") subsidiary from gross billing to a net revenue
basis. Accordingly, reported PEO revenues and related cost of sales for fiscal
years 2002 and 2001 have been reduced by $20.1 million and $33.6 million,
respectively, with no effect on operating profit or the net results of the
Company.

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 placed
in operation, 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.

Income Taxes: Income taxes are provided using the liability method (see Note G).

Foreign Exchange Contracts: Gains and losses on foreign currency option and
forward contracts designated as hedges of existing assets and liabilities and of
identifiable firm commitments are deferred and included in the measurement of
the related foreign currency transaction (see Note O).

Translation of Foreign Currencies: The U.S. dollar is the Company's functional
currency throughout the world, except certain European subsidiaries. Where the
U.S. dollar is used as the functional currency, foreign currency gains and
losses are included in operations. The translation adjustments recorded as a
separate component of stockholders' equity result from changes in exchange rates
affecting the reported assets and liabilities of the European subsidiaries whose
functional currency is not the U.S. dollar.

Earnings Per Share: Basic earnings per share is calculated by dividing net
earnings by the weighted-average number of common shares outstanding during the
period. The diluted earnings per share computation includes the effect, if any,
of shares that would be issuable upon the exercise of outstanding stock options,
reduced by the number of shares which are assumed to be purchased by the Company
from the resulting proceeds at the average market price during the period (see
Note I).


65



VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE A--Summary of Significant Accounting Policies--Continued

Comprehensive Income: Comprehensive income is the net income of the Company
combined with other changes in stockholders' equity not involving ownership
interest changes. For the Company, such other changes include foreign currency
translation and mark-to-market adjustments related to held-for-sale securities.

Derivatives and Hedging Activities: The Company enters into derivative financial
instrument contracts only for hedging purposes and accounts for them in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" and its amendments SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133," SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities" and SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." (see Note O).

New Accounting Pronouncements: In May 2003, the FASB issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity", to provide new guidance with respect to how an issuer
classifies and measures these items in its financial statements. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatorily redeemable financial
instruments of nonpublic entities. The Company's adoption of SFAS No. 150 in the
fourth quarter did not have an impact on the Company's consolidated financial
position or results of operations.


NOTE B--Securitization Program

Effective April 15, 2002, the Company entered into a $100.0 million, three-year
accounts receivable securitization program (the "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 November 2, 2003, TRFCO had purchased from Volt
Funding a participation interest of $70.0 million out of a pool of approximately
$189.3 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


66


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE B--Securitization Program--Continued

Funding, to satisfy the Company's creditors (subject also, as described in Note
F, 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 new 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 in a
participation interest in receivables by TRFCO would cease and collections
reflecting TRFCO's interest would revert to TRFCO. 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 incurred by
TRFCO on the issuance of its commercial paper, are charged to the Company's
consolidated statement of operations.

The Company incurred charges, in connection with the sale of receivables under
the Securitization Program, of $1.6 million in the fiscal year ended November 2,
2003 compared to $0.9 million in the fiscal year ended November 3, 2002, which
are included in Other Expense on the consolidated statement of operations. The
equivalent cost of funds in the Securitization Program was 2.6% and 2.5% per
annum in the fiscal years 2003 and 2002, 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 performed a sensitivity analysis, changing various key assumptions,
which also indicated the retained interest in receivables approximated fair
value.

At November 2, 2003 and November 3, 2002, the Company's carrying retained
interest, in a revolving pool of receivables of approximately $189.3 million and
$168.2 million, respectively, net of a service fee liability, was approximately
$119.0 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 November
2, 2003 and November 3, 2002, respectively. Accordingly, the trade accounts
receivable included on the November 2, 2003 and November 3, 2002 balance sheet,
has been reduced to reflect the $70.0 million and $60.0 million, respectively,
participation interest sold.

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.


67


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE C--Short-Term Investments and Investments in Securities

At November 2, 2003, and November 3, 2002, short-term investments consisted of
$4.1 million and $3.8 million, respectively, invested in mutual funds for the
Company's deferred compensation plan (see Note N).

At November 2, 2003 and November 3, 2002, the Company had an available-for-sale
investment in equity securities of $193,000 and $52,000, respectively. The gross
unrealized gains of $153,500 and $12,000 at November 2, 2003 and November 3,
2002, respectively, were included as a component of accumulated other
comprehensive (loss) income.

During fiscal 2001, the Company sold an investment in equity securities,
previously written off in 1997, resulting in a pre-tax gain of $6.3 million and
wrote down a non-current investment in marketable securities resulting in a
charge to earnings and an adjustment to other comprehensive income of $0.7
million ($0.4 million, net of taxes) as the decline in market value was
considered other than temporary.


NOTE D--Inventories

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



November 2, November 3,
2003 2002
------------ -----------
(In thousands)

Staffing Services $32
Telephone Directory $12,898 11,355
Telecommunications Services 18,320 14,394
Computer Systems 6,139 3,909
------- -------
Total $37,357 $29,690
======= =======


The cumulative amounts billed under service contracts at November 2, 2003 and
November 3, 2002 of $3.6 million and $2.1 million, respectively, are credited
against the related costs in inventory.

NOTE E--Short-Term Borrowings

At November 2, 2003, the Company had total outstanding bank borrowings of $4.1
million under credit lines. These credit lines with foreign banks that provide
for borrowings and letters of credit up to an aggregate of $11.1 million expire
during fiscal year 2004, unless renewed. The weighted average interest rate of
short-term borrowings at each year-end was 9.9% at the end of fiscal 2003 and
62% at the end of fiscal 2002. Borrowings in foreign currencies provide a hedge
against devaluation in foreign currency denominated assets. The weighted average
interest rate in fiscal 2002 was significantly higher as the borrowings were
primarily by the Company's Uruguayan operation from Uruguayan banks, whose
interest rates reflected the country's high inflation level.


68





VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE F--Long-Term Debt and Financing Arrangements

Long-term debt consists of the following:
November November
2, 2003 3, 2002
-------- --------
(In thousands)

8.2% term loan (a) $14,469 $14,810
Notes payable (b) 1,183
-------- --------
14,469 15,993
Less amounts due within one year 371 1,524
-------- --------
Total long-term debt $14,098 $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 certain land and buildings that had a
carrying amount at November 2, 2003 of $11.0 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.

69


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

Note F--Long-Term Debt--Continued

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, NA, Wells Fargo, NA and Lloyds TSB Bank PLC. Borrowings and letters of
credit under the Credit Facility are limited to a specific borrowing base, which
is based upon the level of specified receivables at the time of each
calculation. At November 2, 2003, the borrowing base was approximately $40.0
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 annual
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 November 2, 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 3.0% per annum. At November 2, 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 November 2, 2003
was $234.2 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 the fiscal year. As a result of the loss sustained by the Company in
fiscal year 2002, the Company was restricted from paying dividends in fiscal
2003. 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 November 2,
2003 the Company was in compliance with all covenants in the Credit Agreement
and believes it will be in compliance throughout its remaining term.

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 November 2, 2003, four of those guarantors have pledged approximately $52.4
million of accounts receivable, other than those in the Securitization Program,
as collateral for the 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.

Principal payment maturities on long-term debt outstanding at November 2, 2003
are:

Fiscal Year Amount
----------- -------------
(In thousands)

2004 $371
2005 402
2006 436
2007 474
2008 514
Thereafter 12,272
-------
$14,469
=======



70


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE G--Income Taxes

The components of the Company's income (loss) from continuing operations before
income taxes by location, and the related income tax provision (benefit) are as
follows:



Year Ended
-------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- --------- --------
(In thousands)

The components of income (loss) from continuing
operations before income taxes, based on the location
of operations, consist of the following:
Domestic $3,523 ($6,123) $10,421
Foreign 4,524 (1,384) 597
------- ------- -------
$8,047 ($7,507) $11,018
======= ======= =======

The components of the income tax provision (benefit) include:
Current:
Federal (a) $518 ($5,539) $1,110
Foreign 2,086 486 117
State and local 600 (1,165) 513
------- ------- -------
Total current 3,204 (6,218) 1,740
------- ------- -------
Deferred:
Federal $232 $3,345 $2,366
Foreign (202) 128 (145)
State and local 52 425 399
------- ------- -------
Total deferred 82 3,898 2,620
------- ------- -------
Total income tax provision (benefit) $3,286 ($2,320) $4,360
======= ======= =======

(a) Reduced in 2003 and 2001 and increased in 2002 by benefits of $0.8 million,
$1.0 million and $0.2 million, respectively, from general business credits.


The consolidated effective tax rates are different than the U.S. Federal
statutory rate. The differences result from the following:

Year Ended
------------------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
------- -------- --------
Statutory rate 35.0% (35.0%) 35.0%
State and local taxes, net of federal
tax benefit 6.4 (7.8) 5.1
Tax effect of foreign operations 3.8 14.9 2.1
Goodwill amortization 2.6
General business credits (4.5) (3.5) (5.7)
Other-net 0.1 0.5 0.5
------ ------ ------
Effective tax rate 40.8% (30.9%) 39.6%
====== ====== ======



71


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE G--Income Taxes--Continued

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and also include foreign
operating loss carryforwards. Significant components of the Company's deferred
tax assets and liabilities are as follows:



November November
2, 2003 3, 2002
-------- --------
(In thousands)

Deferred Tax Assets:
Allowance for doubtful accounts $3,626 $4,144
Inventory valuation 19 19
Foreign loss carryforwards 830 687
Goodwill 2,805 3,069
Compensation accruals and deferrals 4,355 3,644
Warranty accruals 74 99
Foreign asset bases 357 155
Other-net 1,040 1,110
------- -------
Total deferred tax assets 13,106 12,927
Less valuation allowance for deferred tax assets 3,635 3,756
------- -------
Deferred tax assets, net of valuation allowance 9,471 9,171
------- -------

Deferred Tax Liabilities:
Software development costs 8,682 12,520
Earnings not currently taxable 131 100
Accelerated book depreciation 7,188 2,951
------- -------
Total deferred tax liabilities 16,001 15,571
------- -------

Net deferred tax liabilities ($6,530) ($6,400)

Balance sheet classification:
Current assets $8,722 $8,343
Non-current liabilities (15,252) (14,743)
------- -------
Net deferred tax liabilities ($6,530) ($6,400)
======= ========


At November 2, 2003, deferred tax assets included $0.8 million related to
foreign loss carryforwards, with no limitation on the carry forward period and
$2.8 million related to goodwill written off as impaired. For financial
statement purposes, a full valuation allowance of $3.6 million has been
recognized due to the uncertainty of the realization of the foreign loss
carryforwards and future tax deductions related to goodwill. The valuation
allowance decrease during 2003 of $0.1 million was principally due to the
goodwill.

Substantially all of the undistributed earnings of foreign subsidiaries of $8.3
million at November 2, 2003 are considered permanently invested and,
accordingly, no federal income taxes thereon have been provided. Should these
earnings be distributed, foreign tax credits would reduce the additional federal
income tax that would be payable. Availability of credits is subject to
limitations; accordingly, it is not practicable to estimate the amount of the
ultimate deferred tax liability, if any, on accumulated earnings.



72


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE H--Goodwill and Other Intangibles

As of the beginning of fiscal 2002, the Company adopted 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
testing annually and whenever events or changes in circumstances indicate that
their carrying amounts may not be recoverable, using fair value methodology.
Intangible assets with finite, measurable lives continue to be amortized over
their respective useful lives until they reach their estimated residual values,
and are reviewed for impairment in accordance with SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." As a result, the Company did
not incur any expense for the amortization of goodwill in fiscal years 2003 and
2002 (however, as discussed below, the Company did record a charge for the
impairment of goodwill as of the beginning of fiscal 2002). The pretax expense
for the amortization of goodwill included in continuing operations was $3.0
million in fiscal year 2001.

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
as of the beginning of fiscal 2002. The result of testing goodwill for
impairment in accordance with SFAS No. 142, as of November 5, 2001, was a
non-cash charge of $31.9 million, which is reported under the caption
"Cumulative effect of a change in accounting." Using the same valuations 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 no impairment existed, since its fair
value exceeded the carrying value.

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 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 publishes independent directories (see Note
J). Due to the fact that some of the directories purchased had not performed as
well as projected, and in some cases had incurred losses, an impairment charge
of $8.0 million was recognized.

The changes in the carrying amount of goodwill by segment during the fiscal year
ended November 3, 2002 were as follows:


November Impairment November
4, 2001 Charge (1) 3, 2002
-------- ----------- --------
(In thousands)


Staffing Services $32,271 $23,930 $8,341
Telephone Directory 6,907 6,907
Computer Systems 642 642
------- ------- -------
Total $39,820 $30,837 $8,983
======= ======= =======



(1) The impairment charge did not include the $1.1 million charge related to
the goodwill associated with the westVista joint venture, discussed above.


73


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE H--Goodwill and Other Intangibles--Continued

The following tables reflect the impact that the elimination of the amortization
pursuant to SFAS No. 142 would have had on prior year net income and net income
per share, if SFAS No. 142 had been adopted at the beginning of fiscal year
2001:

Year Ended
November 4, 2001
----------------
(In thousands, except
per share data)

Reported net income $5,844
Add back: Goodwill amortization, net of taxes (a) 2,303
-------
Adjusted net income $8,147
=======

Per Share Data
Basic and Diluted:
Reported net income per share $0.38
Add back: Goodwill amortization per share (a) 0.15
------
Adjusted net income per share $0.53
======

(a) Includes goodwill amortization applicable to discontinued operations of and
$1.1 million, net of taxes, or $0.07 per share, for the fiscal year ended
November 4, 2001.


NOTE I--Per Share Data

In calculating basic earnings per share, the effect of dilutive securities is
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.



Year Ended
--------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------

Denominator for basic earnings per share -
Weighted average number of shares 15,218 15,217 15,212

Effect of dilutive securities:
Employee stock options 7 - 32
------ ------ ------
Denominator for diluted earnings per share -
Adjusted weighted average number of shares 15,225 15,217 15,244
====== ====== ======



Options to purchase 582,539, 566,359 and 573,241 shares of the Company's common
stock were outstanding at November 2, 2003, November 3, 2002 and November 4,
2001, respectively but were not included in the computation of diluted earnings
per share because the effect of inclusion would have been antidilutive.


74



VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE J--Sale of Subsidiaries and Businesses

On November 30, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), which 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, was reflected in the Company's first quarter of fiscal 2002. The
results of operations of Autologic have been classified as discontinued and
Autologic's prior period results have been reclassified.

Included in discontinued operations, as a result of the sale of Autologic, for
the two fiscal years ended November 3, 2002 are:


November November
3, 2002 4, 2001
-------- ---------
(In thousands)

Revenue $3,296 $68,518
====== =======
Loss before taxes and minority interest ($488) ($1,412)
Income taxes (benefit) 153 110
Minority interest 138 488
------ ------
Loss from operations (197) (814)
------ ------

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

Gain (loss) from discontinued operations $4,310 ($814)
====== ======

In August 2002, the Company's 50% owned joint venture, westVista, was liquidated
with one operation sold to an unaffiliated third party and the other operation
acquired by the Company. The terms of the initial purchase agreement required
the Company and its partner to make future payments to the previous owner.
Accordingly, 50% of this liability has been accrued by the Company and the gain
on the sale of approximately $0.1 million has been deferred.

Prior to the sale, the Company's portion of net income was $25,000 in fiscal
2002 and the portion of net loss was $49,000 in fiscal 2001, which is included
in other income (expense). In addition in fiscal 2002, the Company recorded a
charge for the write-down of goodwill related to the joint venture of $1.1
million as a portion of the Cumulative Effect of a Change in Accounting (see
Note H).

In April 2001, the Company sold its interest in a real estate partnership,
resulting in a pre-tax gain of $4.2 million.


75


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE K--Stock Option Plans

In May 1995, the Company adopted a new Non-Qualified Stock Option Plan, which
initially enabled the granting of options to acquire up to 1.2 million shares of
common stock to key employees and, as amended in January 1998, directors of the
Company. Option exercise prices may not be less than 100% of the market price of
the shares on the date the options are granted. The term of each option, which
may not exceed ten years, and vesting period of each option are at the
discretion of the Company. Currently outstanding options become fully vested
within one to five years after the date of grant. At November 2, 2003, options
to purchase 488,039 (457,105 at November 3, 2002) shares were vested and 347,854
(367,034 at November 3, 2002) shares were available for future grants under the
plan.

Transactions involving outstanding stock options under the plan were:

Number of Weighted Average
Shares Exercise Price
--------- ----------------

Outstanding-November 3, 2000 581,350 $21.08

Granted 31,650 18.49
Exercised (7,650) 18.08
Forfeited (31,609) 19.33
-------
Outstanding November 4, 2001 573,741 21.08

Granted 4,500 18.13
Exercised (1,750) 18.01
Forfeited (10,132) 20.16
------
Outstanding-November 3, 2002 566,359 21.08

Granted 38,750 12.02
Exercised (3,000) 18.08
Forfeited (19,570) 21.43
-------
Outstanding-November 3, 2003 582,539 $20.48
========

Price ranges of outstanding and exercisable options as of November 2, 2003 are
summarized below:



Outstanding Options Exercisable Options
------------------------------------------------------- ---------------------------------------
Average
Range of Number Remaining Weighted Average Number Weighted Average
Exercise Prices of Shares Life (Years) Exercise Price of Shares Exercise Price
- --------------- ---------- ------------ ---------------- ---------- ----------------

$10.67 - $17.50 71,300 7 $13.99 27,900 $16.69
$18.08 - $18.08 262,633 2 $18.08 262,633 $18.08
$18.13 - $24.22 153,506 6 $21.14 106,006 $21.46
$25.42 - $50.56 95,100 4 $30.90 91,500 $30.84




76


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE L--Segment Disclosures

Financial data concerning the Company's sales, segment profit (loss) and
identifiable assets by reportable operating segment for fiscal years 2003, 2002
and 2001 are presented in tables below.

Total sales include both sales to unaffiliated customers, as reported in the
Company's consolidated statements of operations, and intersegment sales. Sales
between segments are generally priced at fair market value. The Company
evaluates performance based on segment profit or loss from operations before
general corporate expenses, interest income and other expense, interest expense,
foreign exchange gains and losses and income taxes.

The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Therefore, the
Company's operating profit is the total segment profit less general corporate
expenses. Identifiable assets are those assets that are used in the Company's
operations in the particular operating segment. Corporate assets consist
principally of cash and cash equivalents, investments and an Enterprise Resource
Planning system.

The Company operates in two major businesses, which are primarily focused on the
markets they serve: staffing services and telecommunications and information
solutions. The Company's internal reporting structure is based on the services
and products provided to customers which results in the following four
reportable operating segments:

Staffing Services - This segment provides a broad range of employee staffing
services to a wide range of customers throughout the United States, Canada and
Europe. These services fall within three major functional areas: Staffing
Solutions, Information Technology Solutions and E-Procurement Solutions.
Staffing Solutions provides a full spectrum of managed staffing,
temporary/alternative personnel employment and direct hire placement and
professional employer organization services. Information Technology Solutions
provides a wide range of information technology services, including consulting,
turnkey project management and software and web development. E-Procurement
Solutions provides global vendor neutral procurement and management solutions
for supplemental staffing using web-based software systems.

Telephone Directory - This segment publishes independent telephone directories
in the United States and publishes telephone directories in Uruguay under a
contract with the government-owned telephone company; provides telephone
directory production, commercial printing, database management, sales and
marketing services; licenses directory production and contract management
software systems to directory publishers and others; and provides services,
principally computer-based projects, to public utilities and financial
institutions.

Telecommunications Services - This segment provides telecommunications services,
including design, engineering, construction, installation, maintenance and
removals in the outside plant and central office of telecommunications and cable
companies, and within their customers' premises, as well as for both large
commercial and governmental entities requiring telecommunications services; and
also provides complete turnkey services for wireless and wireline
telecommunications companies.


77


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE L--Segment Disclosures--Continued

Computer Systems - This segment provides directory assistance services, both
traditional and enhanced, to wireline and wireless telecommunications companies;
provides directory assistance content; designs, develops, integrates, markets,
sells and maintains computer-based directory assistance systems and other
database management and telecommunications systems, primarily for the
telecommunications industry; and provides IT services to the Company's other
businesses and third parties.

Sales, operating profit and identifiable assets by the Company's reportable
operating segment are as follows:



November November November
2, 2003 3, 2002 4, 2001
--------- -------- --------
Net Sales (In thousands)
Staffing Services:

Traditional Staffing $1,266,875 $1,141,717 $1,251,282
Managed Services 1,043,572 745,667 737,417
---------- ---------- ----------
Total gross sales 2,310,447 1,887,384 1,988,699
Less Non-recourse Managed Services (967,379) (679,110) (503,027)
Intersegment sales 2,367 2,044 12,169
---------- ---------- ----------
1,345,435 1,210,318 1,497,841
---------- ---------- ----------
Telephone Directory:
Sales to unaffiliated customers 70,116 83,212 99,682
Intersegment sales 43 114 264
---------- ---------- ----------
70,159 83,326 99,946
---------- ---------- ----------
Telecommunications Services:
Sales to unaffiliated customers 112,201 104,039 246,892
Intersegment sales 638 4,833 2,040
---------- ---------- ----------
112,839 108,872 248,932
---------- ---------- ----------
Computer Systems:
Sales to unaffiliated customers 84,472 72,261 66,435
Intersegment sales 9,167 6,535 4,863
---------- ---------- ----------
93,639 78,796 71,298
---------- ---------- ----------

Elimination of intersegment sales (12,215) (13,526) (19,336)
---------- ---------- ----------
Total Net Sales $1,609,857 $1,467,786 $1,898,681
========== ========== ==========
Segment Profit (Loss)
Staffing Services $21,072 $20,469 $16,558
Telephone Directory 7,674 6,712 2,238
Telecommunications Services (3,986) (13,259) 7,353
Computer Systems 14,679 8,912 10,739
---------- ---------- ----------
Total segment profit 39,439 22,834 36,888

General corporate expenses (27,668) (22,704) (24,416)
---------- ---------- ----------
Total Operating Profit $11,771 $130 $12,472
========== ========== ==========



78


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE L--Segment Disclosures--Continued

November November
2, 2003 3, 2002
-------- --------
(In thousands)
Assets:
Staffing Services $350,796 $332,482
Telephone Directory 60,152 60,105
Telecommunications Services 49,053 46,666
Computer Systems 39,006 31,860
-------- --------
499,007 471,113
Cash, investments and other corporate assets 39,686 38,477
-------- --------
Total assets $538,693 $509,590
======== ========

Sales to external customers and assets of the Company by geographic area are as
follows:



Year Ended
------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)

Sales:
Domestic $1,484,720 $1,349,319 $1,765,237
International 125,137 118,467 133,444
---------- ---------- ----------
$1,609,857 $1,467,786 $1,898,681
=========== ========== ==========


Year Ended
--------------------------------------
November November
2, 2003 3, 2002
-------- --------
(In thousands)
Assets:
Domestic $492,903 $467,303
International 45,790 42,287
-------- --------
$538,693 $509,590
======== ========


Sales for all periods exclude sales by Autologic, which was reclassified as a
discontinued operation. (see Note J)

In fiscal 2003, the Telecommunications Services segment's sales to three
customers accounted for approximately 23%, 18%, and 12%, respectively, of the
total sales of that segment; the Computer Systems segment's sales to two
customers accounted for approximately 27% and 13% of the total sales of that
segment; the Staffing Services segment's sales to one customer accounted for
approximately 13% of the total sales of that segment; and the Telephone
Directory segment's sales to one customer accounted for approximately 10% of the
total sales of that segment. In fiscal 2003, the sales to seven operating units
of one customer, Microsoft Corporation, accounted for 10.6% of the Company's
consolidated net sales.


79


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE L--Segment Disclosures--Continued

In fiscal 2002, the Telecommunications Services segment's sales to three
customers accounted for approximately 24%, 20%, and 12%, respectively, of the
total sales of that segment; and the Computer Systems segment's sales to one
customer accounted for approximately 30% of that segment. In fiscal 2002, there
were no customers to which sales accounted for over 10% of the Company's
consolidated net sales.

In fiscal 2001, the Telecommunications Services segment's sales to three
customers accounted for approximately 23%, 17%, and 12%, respectively, of the
total sales of that segment; and the Computer Systems segment's sales to one
customer accounted for approximately 35% of that segment. In fiscal 2001, there
were no customers to which sales accounted for over 10% of the Company's
consolidated net sales.

The loss of one or more of these customers, unless the business is replaced by
the segment, could result in an adverse effect on the results for that segment's
business, although the Company does not believe that there would be a material
adverse effect on the results of the Company and its subsidiaries taken as a
whole.

Capital expenditures and depreciation and amortization by the Company's
operating segments are as follows:



Year Ended
-------------------------------------------------
November November November
2, 2003 3, 2002 4, 2001
-------- -------- --------
(In thousands)

Capital Expenditures:
Staffing Services $8,026 $9,063 $12,062
Telephone Directory 2,104 403 2,891
Telecommunications Services 1,766 960 3,491
Computer Systems 4,768 3,041 3,520
-------- -------- --------
Total segments 16,664 13,467 21,964
Corporate 1,326 1,225 5,148
-------- -------- --------
$17,990 $14,692 $27,112
======== ======== ========
Depreciation and Amortization (a):
Staffing Services $8,942 $7,339 $8,275
Telephone Directory 2,024 2,202 3,665
Telecommunications Services 3,870 4,102 4,716
Computer Systems 3,770 2,978 2,979
-------- -------- --------
Total segments 18,606 16,621 19,635
Corporate 5,725 5,545 4,947
-------- -------- --------
$24,331 $22,166 $24,582
======== ======== ========


(a) Includes depreciation and amortization of property, plant and equipment for
fiscal years 2003, 2002 and 2001 of $24.2 million, $21.8 million and $20.5
million, respectively.


80



VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE M--Quarterly Results of Operations (Unaudited)

The following is a summary of unaudited quarterly results of operations for the
fiscal years ended November 2, 2003 and November 3, 2002. Each quarter contained
thirteen weeks.



Fiscal 2003 Quarter (Note 1)
-----------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share data)

Net sales $352,535 $403,406 $415,158 $438,758
======== ======== ======== ========

Gross profit $16,529 $24,388 $30,384 $36,408
======== ======== ======== ========

Net (loss) income ($3,803) ($432) $2,111 $6,885
======== ======== ======== ========
Basic and Diluted earnings per share:
Net (loss) income ($0.25) ($0.03) $0.14 $0.45
======== ======== ======== ========


Fiscal 2002 Quarter (Note 1 and 2)
------------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
(In thousands, except per share data)

Net sales $334,096 $362,274 $371,849 $399,567
======== ======== ======== ========

Gross profit $11,778 $20,598 $26,835 $37,599
======== ======== ======== ========

(Loss) income from continuing operations ($6,723) ($4,411) $1,133 $4,814
Discontinued operations 4,310
Cumulative effect of a change in accounting (31,927)
-------- -------- -------- --------
Net (loss) income ($34,340) ($4,411) $1,133 $4,814
======== ======== ======== ========

Basic and Diluted earnings per share:
(Loss) income from continuing operations ($0.44) ($0.29) $0.07 $0.32
Discontinued operations 0.28
Cumulative effect of a change in accounting (2.10)
-------- -------- -------- --------
Net (loss) income ($2.26) ($0.29) $0.07 $0.32
======== ======== ======== ========



Note 1 - As previously announced, the Company has changed the method of
reporting revenues of its Professional Employer Organization ("PEO")
subsidiary, Shaw & Shaw, from gross billing to a net revenue basis in
fiscal year 2003. Accordingly, reported PEO revenues and related cost
of sales for the first quarter of fiscal 2003 and the fiscal year 2002
have been reduced, with no effect on gross profit or the net results
to the Company.

Note 2 - Pursuant to the Company's previously announced adoption of SFAS
No.145, results for fiscal year 2002 have been restated to give effect
to the reclassification of a charge of $2.1 million arising from March
2002 early payment of the Company's 7.92% Senior Notes to Other
Expense, previously presented as an extraordinary item.

Historically, the Company's results of operations have been lowest in its first
fiscal quarter as a result of reduced requirements for the Staffing Services
segment's personnel due to the Thanksgiving, Christmas and New Year holidays as
well as certain customer facilities closing for one to two weeks. In addition,
the Telephone Directory segment's DataNational division publishes more
directories during the second half of the fiscal year. The


81


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE M--Quarterly Results of Operations (Unaudited)--Continued

Uruguay division of the Telephone Directory segment produces a major portion of
its revenues and most of its profits in the Company's fourth fiscal quarter.
During the third and fourth quarter of the fiscal year, the Staffing Services
segment benefits from a reduction of payroll taxes and increased use of
Administrative and Industrial services during the summer vacation period.


NOTE N--Employee Benefits

The Company has various savings plans that permit eligible employees to make
contributions on a pre-tax salary reduction basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. In January 2000, the
Company amended the savings plan for permanent employees to provide a Company
contribution in the form of a 50% match of the first 3% of salary contributed by
eligible participants. For participants with less than five years of service,
the Company's matching contributions vest at 20% per year over a five-year
period. Company contributions to the plan are made semi-annually. Under the
plan, the Company's contributions of $1.3 million, $1.3 million and $1.2 million
in fiscal 2003, fiscal 2002 and fiscal 2001, respectively, were accrued and
charged to compensation expense.

The Company has a non-qualified deferred compensation and supplemental savings
plan, which permits eligible employees to defer a portion of their salary. This
plan consists solely of participant deferrals and earnings thereon, which are
reflected as a current liability under accrued wages and commissions. The
Company invests the assets of the plan in mutual funds based upon investment
preferences of the participants.


NOTE O--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 swap contracts
and foreign currency options and exchange contracts, are recognized in the
consolidated financial statements at fair value regardless of the purpose or
intent for holding the instrument. Changes in the fair value of derivative
financial instruments are either recognized periodically in income or in
stockholders' equity as a component of comprehensive income, depending on
whether the derivative financial instrument qualifies for hedge accounting and,
if so, whether it qualifies as a fair value hedge or cash flow hedge. Generally,
changes in fair values of derivatives accounted for as fair value hedges are
recorded in income along with the portions of the changes in the fair values of
the hedged items that relate to the hedged risks. Changes in fair values of
derivatives accounted for as cash flow hedges, to the extent they are effective
as hedges, are recorded in other comprehensive income, net of deferred taxes. At
November 2, 2003, the Company had outstanding foreign currency option and
forward contracts in the aggregate notional amount equivalent to $10.0 million,
which approximated its net investment in foreign operations and is accounted for
as a hedge under SFAS No. 52 "Foreign Currency Translation."

Included in cash and cash equivalents at November 2, 2003 and November 3, 2002
was approximately $18.9 million and $11.5 million, respectively, that was
restricted to cover obligations that were reflected in accounts payable at that
date. These amounts primarily related to certain contracts with customers, for
whom the Company manages the customers' alternative staffing requirements,
including the payment of associate vendors.


82


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

NOTE P--Commitments

The future minimum rental commitments as of November 2, 2003 for all
non-cancellable operating leases were as follows:



Fiscal Year Total Office Space Equipment
----------- ----- ------------ ---------
(In thousands)

2004 $18,619 $17,012 $1,607
2005 12,974 12,355 619
2006 8,058 7,903 155
2007 4,859 4,859
2008 1,845 1,845
Thereafter 3,001 3,001
------- ------- --------
$49,356 $46,975 $2,381
======= ======= ========


Many of the leases also required the Company to pay or contribute to property
taxes, insurance and ordinary repairs and maintenance.

Rental expense for all operating leases for fiscal years 2003, 2002 and 2001 was
$24.0 million, $23.6 million and $24.3 million, respectively.

In fiscal 2000, the Company began development of a new internet-based Front End
System designed to improve efficiency and connectivity in the recruiting,
assignment, customer maintenance and other functions in the branch offices of
the Staffing Services segment. The total cost to develop and install this system
is currently anticipated to be approximately $12.0 million, (reduced from the
$16.0 million, previously reported due to anticipated cost savings) of which
$8.1 million has been incurred and capitalized to date. The Company has no other
material capital commitments.


NOTE Q--Related Party Transactions

During fiscal 2003, the Company paid $0.5 million to the law firm of which Lloyd
Frank, a director and member of the Company's Audit Committee (until April
2004), is a member, primarily for the services rendered. During that year, the
Company also paid $47,700 to the law firm of which Bruce Goodman, a director, is
a partner for services rendered to the Company and paid $16,500 to Irwin B.
Robins, a director, for legal consulting services.

The Company rents approximately 2,500 square feet of space to a corporation
owned by Steven A. Shaw, an officer and director, in the Company's El Segundo,
California facility, which the Company does not require for its own use, on a
month-to-month basis at a rental of $1,500 per month. Based on the nature of the
premises and a recent market survey conducted by the Company, the Company
believes the rent is the fair market rental for such space.



83





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.


ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

The Company carried out an evaluation of the effectiveness of the design
and operation of its "disclosure controls and procedures," as defined in,
and pursuant to, Rule 13a-15 of the Securities Exchange Act of 1934, as of
November 2, 2003 under the supervision and with the participation of the
Company's management, including the Company's Chairman of the Board,
President and principal executive officer and its Senior Vice President and
principal financial officer. Based on that evaluation, the Company's
Chairman of the Board, President and principal executive officer and its
Senior Vice President and principal financial officer concluded that, as of
the date of their evaluation, the Company's disclosure controls and
procedures were effective to ensure that material information relating to
the Company and its subsidiaries is made known to them on a timely basis.

Changes in internal controls

There were no significant changes in the Company's internal controls over
financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company's internal control over financial
reporting.


PART III


The information called for by Part III (Items 10, 11, 12, 13 and 14) of Form
10-K will be included in the Company's Proxy Statement for the Company's 2003
Annual Meeting of Shareholders, which the Company intends to file within 120
days after the close of its fiscal year ended November 2, 2003 and is hereby
incorporated by reference to such Proxy Statement, except that the information
as to the Company's executive officers which follows Item 4 in this Report and
the information as to the Company's equity compensation plans contained in the
last paragraph of Item 5 in this Report are incorporated by reference into Items
10 and 12, respectively, of this Report.


84




PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K

15(a)(1). Financial Statements
--------------------

The following consolidated financial statements of Volt Information
Sciences, Inc. and subsidiaries are included in Item 8 of this Report:
Page
----

Consolidated Balance Sheets--November 2, 2003 and November 3, 2002 52

Consolidated Statements of Operations--Years ended November 2, 2003,
November 3, 2002 and November 4, 2001 53

Consolidated Statements of Stockholders' Equity--Years ended
November 2, 2003, November 3, 2002 and November 4, 2003 54

Consolidated Statements of Cash Flows--Years ended November 2, 2003,
November 3, 2002 and November 4, 2001 55

Notes to Consolidated Financial Statements 57


15(a)(2). Financial Statement Schedules
-----------------------------

The following consolidated financial statement schedule of Volt
Information Sciences, Inc. and subsidiaries is included in response
to Item 15(d):

Schedule II--Valuation and qualifying accounts S-1

Other schedules (Nos. I, III, IV and V) for which provision
is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions
or are not applicable and, therefore, have been omitted.




85


15(a)(3). Exhibits
--------

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

3.1 Restated Certificate of Incorporation of the Company, as filed
with the Department of State of New York on January 29, 1997.
(Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended November 1, 1996).

3.2 By-Laws of the Company. (Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30, 1998,
File No. 1-9232).

4.1(a) Credit Agreement, dated April 12, 2002, among the Company, Gatton
Volt Consulting Group Limited, as borrowers, Volt Delta
Resources, Inc., Volt Information Sciences Funding, Inc., Volt
Directories S. A., Ltd., DataNational, Inc., Volt
Telecommunications Group, Inc. and DataNational of Georgia, Inc.,
as guarantors, the lenders party thereto, and JP Morgan Chase
Bank, as administrative agent. (Exhibit 4.1(a) to the Company's
Current Report on Form 8-K dated April 22, 2002, File No.
1-9232).

4.1(b) Joint and Several Guaranty of Payment, dated as of April 12,
2002, by Volt Delta Resources, Inc., Volt Information Sciences
Funding, Inc., Volt Directories S.A., Ltd., DataNational, Inc.,
Volt Telecommunications Group, Inc. and DataNational of Georgia,
Inc. in favor of JP Morgan Chase Bank, as administrative agent.
(Exhibit 4.1(b) to the Company's Current Report on Form 8-K dated
April 22, 2002, File No. 1-9232).

4.1(c) Volt Security Agreement, dated as of April 12, 2002, by the
Company in favor of JP Morgan Chase Bank, as collateral agent.
(Exhibit 4.1(c) to the Company's Current Report on Form 8-K dated
April 22, 2002, File No. 1-9232).

4.1(d) Subsidiary Security Agreement, dated as of April 12, 2002, among
Volt Telecommunications Group, Inc., Volt Delta Resources, Inc.,
DataNational Inc. and DataNational of Georgia, Inc. in favor of
JP Morgan Chase Bank, as collateral agent. (Exhibit 4.1 (d) to
the Company's Current Report on Form 8-K dated April 22, 2002,
File No. 1-92321).

4.1(e) Pledge Agreement, dated as of April 12, 2002, by the Company in
favor of JP Morgan Chase Bank, as collateral agent. (Exhibit
4.1(e) to the Company's current Report on Form 8-K dated April
22, 2002, File No. 199232).

10.1+ 1995 Non-Qualified Stock Option Plan, as amended. (Exhibit
10.1(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1998, File No. 1-9232).

10.2(a)+ Employment Agreement, dated as of May 1, 1987, between the
Company and William Shaw. (Exhibit 19.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 1, 1987,
File No. 1-9232).

10.2(b)+ Amendment, dated January 3, 1989, to Employment Agreement between
the Company and William Shaw. (Exhibit 19.01(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October 28,
1988, File No. 1-9232).

10.3(a)+ Employment Agreement, dated as of May 1, 1987, between the
Company and Jerome Shaw (Exhibit 19.02 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).

10.3(b)+ Amendment, dated January 3, 1989, to Employment Agreement between
the Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October 28,
1988, File No. 1-9232).

86



15(a)(3). Exhibits--Continued


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

14.* Volt Information Sciences, Inc. and Subsidiaries Code of Ethical
Conduct for Financial Managers

21.* Subsidiaries of the Registrant.

23.* Consent of Ernst & Young LLP.

31.1* Certification of principal executive officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2* Certification of principal financial officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2* Certification of principal executive officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes -Oxley Act of 2002.

32.2* Certification of Principal executive financial officer pursuant
to 18 U.S. C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.


+ Management contract or compensation plan or arrangement.

* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.


15 (b). Reports on Form 8-K


During the quarter ended November 2, 2003, the Company filed Current Report on
Form 8-K dated September 9, 2003 (date earliest event reported) reporting Item
7. Financial Statements and Exhibits and Item 9. Regulation FD Disclosure.

UNDERTAKING


The Company hereby undertakes to furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities Exchange Act of 1934 and
the total amount of securities authorized under any such instruments does not
exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.


87



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

VOLT INFORMATION SCIENCES, INC.

Dated: New York, New York By: /s/ William Shaw
January 27, 2004 ------------------------------------
William Shaw
Chairman of the Board, President
and Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.



Signature Title Date
- --------- ----- -----


/s/William Shaw Chairman of the Board, January 27, 2004
- --------------- President and Chief Executive
William Shaw Officer and Director


/s/James J. Groberg Senior Vice President (Principal January 27, 2004
- --------------- Financial Officer) and Director
James J. Groberg

/s/Jack Egan Vice President, Corporate Accounting January 27, 2004
- --------------- (Principal Accounting Officer)
Jack Egan

/s/Jerome Shaw Director January 27, 2004
- ---------------
Jerome Shaw

/s/Steven A. Shaw Director January 27, 2004
- ---------------
Steven A. Shaw

/s/Lloyd Frank Director January 27, 2004
- ---------------
Lloyd Frank

/s/Irwin B. Robins Director January 27, 2004
- ---------------
Irwin B. Robins

/s/Mark N. Kaplan Director January 27, 2004
- ---------------
Mark N. Kaplan

/s/Bruce G. Goodman Director January 27, 2004
- ---------------
Bruce G. Goodman

/s/William H. Turner Director January 27, 2004
- ---------------
William H. Turner



88






VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS


Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------

Additions
-----------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Period Expenses Accounts Deductions Period
------------ ---------- ----------- ---------- ----------
(In thousands)


Year ended November 2, 2003
Deducted from asset accounts:
Allowance for uncollectable accounts $10,994 $6,227 $6,723 (a,b) $10,498
Allowance for deferred tax assets 3,756 ($121) (c) 3,635
Unrealized gain on marketable securities (12) (85) (d) (97)


Year ended November 3, 2002
Deducted from asset accounts:
Allowance for uncollectable accounts $9,376 $10,188 $8,570 (a,b) $10,994
Allowance for deferred tax assets 602 $3,291 (e) 137 (f) 3,756
Unrealized loss (gain)
on marketable securities 16 (28) (d) (12)


Year ended November 4, 2001
Deducted from asset accounts:
Allowance for uncollectable accounts $8,952 $8,462 $8,038 (a,b,g) $9,376
Allowance for deferred tax assets 548 $396 (c) 342 (g) 602
Unrealized loss on marketable securities 664 62 (d) 710 (h) 16





(a)--Includes write-off of uncollectable accounts.
(b)--Includes a foreign currency translation gain of $22 in 2003 and losses of
$27 in 2002 and $16 in 2001.
(c)--Charge to income tax provision.
(d)--Charge (credit) to stockholders' equity.
(e)--Charge to cumulative effect of a change in accounting of $3,069 and income
tax provision of $222.
(f)--Principally write-off of unutilized foreign tax credits.
(g)--Pertains to the reclassification of assets of discontinued operations,
including allowance for uncollectible accounts of $1,188 and allowance
for deferred tax assets of $342.
(h)--Reclassification adjustment for write down of marketable securities
included in net income.



S-1


INDEX TO EXHIBITS

15(a)(3). Exhibits
--------

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

3.1 Restated Certificate of Incorporation of the Company, as filed
with the Department of State of New York on January 29, 1997.
(Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended November 1, 1996).

3.2 By-Laws of the Company. (Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended October 30, 1998,
File No. 1-9232).

4.1(a) Credit Agreement, dated April 12, 2002, among the Company, Gatton
Volt Consulting Group Limited, as borrowers, Volt Delta
Resources, Inc., Volt Information Sciences Funding, Inc., Volt
Directories S. A., Ltd., DataNational, Inc., Volt
Telecommunications Group, Inc. and DataNational of Georgia, Inc.,
as guarantors, the lenders party thereto, and JP Morgan Chase
Bank, as administrative agent. (Exhibit 4.1(a) to the Company's
Current Report on Form 8-K dated April 22, 2002, File No.
1-9232).

4.1(b) Joint and Several Guaranty of Payment, dated as of April 12,
2002, by Volt Delta Resources, Inc., Volt Information Sciences
Funding, Inc., Volt Directories S.A., Ltd., DataNational, Inc.,
Volt Telecommunications Group, Inc. and DataNational of Georgia,
Inc. in favor of JP Morgan Chase Bank, as administrative agent.
(Exhibit 4.1(b) to the Company's Current Report on Form 8-K dated
April 22, 2002, File No. 1-9232).

4.1(c) Volt Security Agreement, dated as of April 12, 2002, by the
Company in favor of JP Morgan Chase Bank, as collateral agent.
(Exhibit 4.1(c) to the Company's Current Report on Form 8-K dated
April 22, 2002, File No. 1-9232).

4.1(d) Subsidiary Security Agreement, dated as of April 12, 2002, among
Volt Telecommunications Group, Inc., Volt Delta Resources, Inc.,
DataNational Inc. and DataNational of Georgia, Inc. in favor of
JP Morgan Chase Bank, as collateral agent. (Exhibit 4.1 (d) to
the Company's Current Report on Form 8-K dated April 22, 2002,
File No. 1-92321).

4.1(e) Pledge Agreement, dated as of April 12, 2002, by the Company in
favor of JP Morgan Chase Bank, as collateral agent. (Exhibit
4.1(e) to the Company's current Report on Form 8-K dated April
22, 2002, File No. 199232).

10.1+ 1995 Non-Qualified Stock Option Plan, as amended. (Exhibit
10.1(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1998, File No. 1-9232).

10.2(a)+ Employment Agreement, dated as of May 1, 1987, between the
Company and William Shaw. (Exhibit 19.01 to the Company's
Quarterly Report on Form 10-Q for the quarter ended May 1, 1987,
File No. 1-9232).

10.2(b)+ Amendment, dated January 3, 1989, to Employment Agreement between
the Company and William Shaw. (Exhibit 19.01(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October 28,
1988, File No. 1-9232).

10.3(a)+ Employment Agreement, dated as of May 1, 1987, between the
Company and Jerome Shaw (Exhibit 19.02 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 1, 1987, File No.
1-9232).

10.3(b)+ Amendment, dated January 3, 1989, to Employment Agreement between
the Company and Jerome Shaw (Exhibit 19.02(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended October 28,
1988, File No. 1-9232).




15(a)(3). Exhibits--Continued
--------

Exhibit Description
- ------- -----------
14.* Volt Information Sciences, Inc. and Subsidiaries Code of Ethical
Conduct for Financial Managers

21.* Subsidiaries of the Registrant.

23.* Consent of Ernst & Young LLP.

31.1* Certification of principal executive officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2* Certification of principal financial officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1* Certification of principal executive officer pursuant to 18
U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

32.2* Certification of principal executive financial officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.

+ Management contract or compensation plan or arrangement.

* Filed herewith. All other exhibits are incorporated herein by reference to
the exhibit indicated in the parenthetical references.


15 (b). Reports on Form 8-K


During the quarter ended November 2, 2003, the Company filed Current Report on
Form 8-K dated September 9, 2003 (date earliest event reported) reporting Item
7. Financial Statements and Exhibits and Item 9. Regulation FD disclosure.


UNDERTAKING


The Company herby undertakes to Furnish to the Securities and Exchange
Commission, upon request, all constituent instruments defining the rights of
holders of long-term debt of the Company and its consolidated subsidiaries not
filed herewith. Such instruments have not been filed since none are, nor are
being, registered under Section 12 of the Securities Exchange Act of 1934 and
the total amount of securities authorized under any such instruments does not
exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.