-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
E3gCSvL5ax4yzp0JwbDBecTyBfLJ9FoQou4E0luW8MgDkFopgWbihKI+4uziTVmD
iae8+6jus5IW8plpvbS4QQ==
<SEC-DOCUMENT>0001005477-02-000320.txt : 20020414
<SEC-HEADER>0001005477-02-000320.hdr.sgml : 20020414
ACCESSION NUMBER: 0001005477-02-000320
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 4
CONFORMED PERIOD OF REPORT: 20011104
FILED AS OF DATE: 20020204
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: VOLT INFORMATION SCIENCES INC
CENTRAL INDEX KEY: 0000103872
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HELP SUPPLY SERVICES [7363]
IRS NUMBER: 135658129
STATE OF INCORPORATION: NY
FISCAL YEAR END: 1031
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-09232
FILM NUMBER: 02526344
BUSINESS ADDRESS:
STREET 1: 560 LEXINGTON AVENUE
CITY: NEW YORK
STATE: NY
ZIP: 10022-2928
BUSINESS PHONE: 2127042400
MAIL ADDRESS:
STREET 1: 1221 AVENUE OF THE AMERICAS
CITY: NEW YORK
STATE: NY
ZIP: 10020
FORMER COMPANY:
FORMER CONFORMED NAME: VOLT TECHNICAL CORP
DATE OF NAME CHANGE: 19680913
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>d02-35796.txt
<DESCRIPTION>FORM 10-K
<TEXT>
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 4, 2001
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|
The aggregate market value of the common stock held by non-affiliates of the
Registrant as of January 11, 2002 (based on the closing price on the New York
Stock Exchange on that date) was approximately $127 million (based on the number
of shares outstanding on that date, exclusive of all shares held beneficially by
executive officers and directors and their spouses and the Registrant's Savings
Plan, without conceding that all such persons or plans are "affiliates" of the
Registrant).
The number of shares of common stock outstanding as of January 11, 2002 was
15,215,665.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for its 2002 Annual Meeting are
incorporated by reference into Part III of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Volt Information Sciences, Inc. is a New York corporation, incorporated in 1957.
We sometimes refer to Volt 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: Staffing Solutions, Information Technology ("IT")
Solutions and E-Procurement Solutions, which provide the following
services:
o Staffing Solutions - a full spectrum of managed staffing,
temporary/alternative personnel employment and direct hire placement
and professional employer organization services.
o Information Technology Solutions - a wide range of information
technology services including consulting, turnkey project management
and software and web development.
o E-Procurement Solutions - 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, outside
plant construction, system installation, maintenance, removals and
distribution of telecommunications products to the outside plant and
central office of telecommunications and cable companies and within
their customers' premises, as well as for large businesses and
governmental entities requiring telecommunications services.
(4) Computer Systems - This segment provides directory assistance
outsourcing 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 for the telecommunications
industry; and provides IT services to the Company's other businesses
and to third parties.
On September 25, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), entered into an
agreement for Agfa Corporation, a subsidiary of Agfa Gevaert N.V., to acquire
all of Autologic's outstanding shares through a tender offer and subsequent
merger. The tender offer was completed on November 30, 2001, at which time the
Company received $24.2 million for its shares. Autologic constituted the
Company's previously reported Electronic Publication and Typesetting segment.
See Selected Financial Data in Item 6 of this Report, Management Discussion and
Analysis of Financial Condition and Results of Operations in Item 7 of this
Report and Note I of the Notes to Consolidated Financial Statements in Item 8 of
this Report.
-2-
<PAGE>
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 4, 2001, and those assets identifiable within
each segment at the end of each of those fiscal years (see Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note K of Notes to Consolidated Financial Statements in Items 7 and 8,
respectively, of this Report):
<TABLE>
<CAPTION>
November November October
4, 2001 3, 2000 29, 1999
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES (Dollars in thousands)
Staffing Services:
Traditional Staffing $ 1,284,862 $ 1,379,111 $ 1,215,629
Managed Services 737,417 724,632 771,541
----------- ----------- -----------
Total gross sales 2,022,279 2,103,743 1,987,170
Less Non-recourse Managed Services (503,027) (433,212) (285,197)
Intersegment sales 12,169 11,284 5,324
----------- ----------- -----------
1,531,421 1,681,815 1,707,297
----------- ----------- -----------
Telephone Directory:
Sales to unaffiliated customers 99,682 97,499 98,128
Intersegment sales 264 243 221
----------- ----------- -----------
99,946 97,742 98,349
----------- ----------- -----------
Telecommunications Services:
Sales to unaffiliated customers 246,892 292,680 185,263
Intersegment sales 2,040 3,433 2,444
----------- ----------- -----------
248,932 296,113 187,707
----------- ----------- -----------
Computer Systems:
Sales to unaffiliated customers 66,435 59,555 83,320
Intersegment sales 4,863 3,544 617
----------- ----------- -----------
71,298 63,099 83,937
----------- ----------- -----------
Elimination of intersegment sales (19,336) (18,504) (8,606)
----------- ----------- -----------
TOTAL NET SALES $ 1,932,261 $ 2,120,265 $ 2,068,684
=========== =========== ===========
SEGMENT PROFIT (LOSS)
Staffing Services $ 16,558 $ 55,543 $ 43,824
Telephone Directory 2,238 (3,244) 7,342
Telecommunications Services 7,353 19,783 14,122
Computer Systems 10,739 4,741 3,203
----------- ----------- -----------
Total segment profit 36,888 76,823 68,491
General corporate expenses (15,288) (13,997) (12,769)
Financial reporting system expenses (9,128) (1,942) (905)
----------- ----------- -----------
TOTAL OPERATING PROFIT 12,472 60,884 54,817
Interest and other income-net 859 308 1,766
Gain on securities-net 5,552
Gain on sale of partnership interest 4,173
Gain on sale of joint venture interest 2,049
Interest expense (11,880) (9,891) (7,774)
Foreign exchange (loss) gain (158) 638 (428)
----------- ----------- -----------
Income from continuing operations before income taxes $ 11,018 $ 51,939 $ 50,430
=========== =========== ===========
</TABLE>
-3-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
OPERATING SEGMENT DATA--Continued
<TABLE>
<CAPTION>
November November October
4, 2001 3, 2000 29, 1999
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Staffing Services $319,659 $359,903 $300,852
Telephone Directory 75,886 80,852 83,427
Telecommunications Services 87,723 150,248 99,070
Computer Systems 35,039 29,083 32,050
Electronic Publication and Typesetting Systems 44,795 46,768
-------- -------- --------
518,307 664,881 562,167
Assets held for sale 47,635
Cash, investments and other corporate assets 71,294 79,947 56,162
-------- -------- --------
Total assets $637,236 $744,828 $618,329
======== ======== ========
</TABLE>
Note: On September 25, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), entered into an
agreement for Agfa Corporation, a subsidiary of Agfa-Gevaert N.V., to
acquire all of Autologic's outstanding shares through a tender offer and
subsequent merger. The tender offer was completed on November 30, 2001, at
which time the Company received $24.2 million for its shares. The proceeds
received by the Company and the Company's gain on the transaction,
presently estimated at $2.0 million, will be reflected in the Company's
first quarter of fiscal 2002. Accordingly, the results of operations of
Autologic, the Company's Electronic Publication and Typesetting segment,
have been classified as discontinued in the statements of income for all
prior periods and Autologic's assets have been included as separate line
item (Assets held for sale) on the Company's fiscal 2001 balance sheet.
-4-
<PAGE>
Forward-Looking Statements Disclosure
In order to keep the Company's shareholders and investors informed of the
Company's future plans and objectives, this Report and other reports and
statements issued by the Company and its officers, from time-to-time, contain
certain statements concerning the Company's future plans, objectives,
performance, intentions and expectations that are, or may be deemed to be,
"forward-looking statements." The Company's ability to do this has been fostered
by the Private Securities Litigation Reform Act of 1995, which provides a "safe
harbor" for forward-looking statements to encourage companies to provide
prospective information so long as those statements are accompanied by
meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those discussed in the statement. The
Company believes that it is in the best interests of its shareholders to take
advantage of the "safe harbor" provisions of that Act.
Although the Company believes that it relies on reasonable assumptions, these
forward-looking statements are subject to a number of known and unknown risks
and uncertainties that could cause the Company's actual results, performance and
achievements to differ materially from those described or implied in the
forward-looking statements. These risks and uncertainties include, but are not
limited to:
o general economic, competitive and other business conditions including the
effects of the current recession in the U.S. and European economies, the
length and depth of the recession and the timing of the recovery
o the continued financial strength of the Company's customers, some of which
have announced layoffs, unfavorable financial results and lowered
financial expectations for the near term
o the degree and timing of obtaining new contracts and the rate of renewals
of existing contracts, as well as customers' degree of utilization of the
Company's services
o material changes in demand from larger customers, including those with
which the Company has national contracts
o the effect of litigation by temporary employees against, and government
activity regarding, temporary help companies and the customers with whom
they do business
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 changes in customers' attitudes toward the use of outsourcing and
temporary personnel
o the Company's ability to recruit qualified employees to satisfy customer
requirements for the Company's staffing services
o the Company's ability to meet competition in its highly competitive
markets with minimal impact on margins
o intense price competition and pressure 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 performance on contracts
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 changes in laws, regulations and government policies
o the degree and effects of inclement weather
o the Company's ability to attract and retain certain classifications of
technologically qualified personnel for its own use, particularly in the
areas of research and development and customer service and maintain
superior technological capability and risks inherent in development,
implementation and upgrading of internal systems
These and certain other factors are discussed in this Report and, from time to
time, in the Company's other reports hereafter filed with the Securities and
Exchange Commission.
-5-
<PAGE>
Staffing Services Segment
Volt's Staffing Services segment, through two divisions, 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 services through the Staffing
Solutions Group, IT Solutions and E-Procurement Solutions while the Commercial
and Light Industrial division provides services through the Staffing Solutions
Group and Shaw & Shaw.
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 services (PEO) are offered by the Company's
subsidiary, Shaw and 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."
Volt Services Group, Volt Europe and Volt Human Resources (the "Staffing
Solutions Group") provide, from over 300 branches and dedicated on-site
offices located on client premises, a broad range of employee staffing and
professional services. 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 a client'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 (payrolling); and specifically
tailored recruitment services.
The Staffing Solutions Group provides skilled employees, such as
professional, computer and other IT specialties, engineering, design,
scientific and technical support in its Technical Placement division and
lesser skilled employees, such as administrative, clerical, office
automation, accounting, bookkeeping and other financial, call center,
light industrial and other personnel in its Commercial and Light
Industrial division. Personnel placements are provided for varying periods
of time (both short and long-term) to companies and other organizations
(including government agencies) 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.
The Staffing Solutions Group furnishes temporary employees to meet
specific customer requirements, 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.
-6-
<PAGE>
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 include centralized and coordinated order processing and
procurement of other qualified staffing providers as subcontractors,
commonly referred to as "associate vendors," for service in remote areas,
as well as supplying secondary source back-up recruiting. Other features
of managed services programs often 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 vendors only after Volt receives
payment from its customer. Volt also acts as an associate vendor to other
national providers to assist them in meeting their obligations to their
customers. The bidding process for these accounts 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 and 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. 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.
The Staffing Solutions Group provides personnel to companies throughout a
broad spectrum of industries, including the computer, electronics,
manufacturing, aerospace, defense, telecommunications, utility, power
(including certain nuclear and fossil fuel power plants), transportation,
petrochemical, chemical, retail, finance, banking, insurance,
architectural and engineering industries, as well as to government
agencies and universities. 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 it fills customer job requirements. Volt Europe maintains
similar computerized resume databases containing resumes of candidates
from the United Kingdom and continental Europe. In addition to maintaining
its proprietary Internet recruiting sites, the segment has numerous
contracts with independent job search web site companies. Individuals
employed by these groups are frequently willing to relocate to fill
assignments. Lesser skilled employees are generally recruited and assigned
locally, and employment information/resumes for these employees are
maintained in computerized databases at branch offices.
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
-7-
<PAGE>
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,
litigation and governmental activity (at European community and national
levels) directed at the way the industry does business is also being
conducted or considered. Volt does not know what effect, if any, the
resolution of these cases or the outcome of this governmental activity
will have on the industry in general or upon this group's business.
Volt Services Group has expanded its services 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, information technology, technical,
accounting, finance and administrative support disciplines. Since the
direct placement recruiters operate within Volt's existing nationwide
branch system, the Company has not experienced significant start-up costs
associated with this service. Customers of this service include customers
of Volt's Staffing Services and other segments.
Shaw & Shaw
Shaw & Shaw, Inc. provides professional employer services (PEO), also
known as "employee leasing," as part of the Commercial and Light
Industrial division. Shaw & Shaw shares the employer responsibilities with
its client companies, typically serving as the administrative employer of
record for either the entire full-time workforce or for a specific
department or division of the client company. Services provided by Shaw &
Shaw include payroll administration, human resource management, legal and
regulatory compliance, comprehensive benefits, including retirement plans,
workers' compensation coverage, loss control and risk management. Shaw &
Shaw utilizes the purchasing power of the Company and, thus, provides its
clients' employees with a competitive benefits package. Clients 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, such as high technology,
retail, convenience markets, country clubs, manufacturing, petroleum,
wholesale products, quick printing, property management, warehousing,
venture capital, call centers, marketing, administrative offices,
maintenance and banking, as well as non-profit organizations. Sales
generated by Shaw & Shaw in fiscal 2001 represented 3% of the Staffing
Services segment's total sales.
Information Technology Solutions
VMC Consulting/Volt Integrated Solutions Group/Volt Europe Solutions
These business units, as part of the Technical Placements division,
perform IT services in the form of project-based work and technical
support, in which the Company assumes greater responsibility for the
finished product than in the traditional temporary staffing relationship.
Services include equipment and software testing, software development,
systems development, consulting, maintenance and technical support
services, web development and testing, information technology services and
technical communications. State-of-the-art technology solutions are
delivered to clients on a project basis, either in Volt's premises or at
the client's location.
-8-
<PAGE>
These services are generally marketed throughout the United States under
the names VMC Consulting and Volt Integrated Solutions Group 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 Integrated Solutions Group is based in Fort Collins,
Colorado; and Volt Europe Solutions and VMC Consulting Europe are based in
Redhill, England.
Although the Information Technology Solutions group continues its
investment in research and development, there is no assurance that this
group's present or future services will be competitive, that the group
will continue to develop new services or that its present services or new
services will continue to be successfully marketed.
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 segment, through its wholly-owned subsidiary, ProcureStaff, Ltd.,
provides a managed services program by means of a vendor neutral, web
based procurement and management solution for alternative staffing. At the
core of the ProcureStaff model is a patent pending business-to-business
e-commerce procurement application that is designed to streamline client
and vendor functions with increased efficiencies while significantly
reducing costs. Utilizing HRP, a web-based software system, and
proprietary management methodologies, ProcureStaff provides a procurement
and management solution for supplemental or alternative staffing,
primarily in the United States and Europe as part of the Technical
Placements division. The Company believes that ProcureStaff represents the
next generation of staffing services systems and software.
ProcureStaff provides its clients 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 require considerable start up
costs and usually take up to four months to implement. ProcureStaff
competes with other companies which provide similar vendor neutral
solutions, some of which are affiliated with competitive staffing
companies. Volt 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 and vendor neutrality of
ProcureStaff is designed to enable Volt to pursue new opportunities in the
business-to-business marketplace.
Although ProcureStaff continues its investment in research and
development, there is no assurance that this division's present or future
services will be competitive, that the division will continue to develop
new services or that present services or new services will continue to be
successfully marketed.
During the week ended November 4, 2001, the entire segment provided
approximately 26,000 of its own employees to its customers, in addition to
employees provided by subcontractors and associate vendors.
-9-
<PAGE>
While the markets for the 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 current recessions in the United
States and Europe, as customers have significantly reduced their requirement for
alternative and permanent staffing and the other services provided by this
segment. Little improvement is expected until the economy begins to recover. The
segment has implemented a series of cost cutting initiatives and is committed to
further cost cutting and cost controls 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 that offer project-oriented services to its customers and thus assumes
greater responsibility for the finished product.
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 firms, and
permanent placement firms, some of which are larger than Volt, as well as with
individuals seeking direct employment with the Company's existing and potential
customers. As the 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 will successfully implement these project-based
contracts, there can be no assurance that the Company will be able to do so, nor
that it can continue to obtain such contracts on a satisfactory basis or
continue delivering quality results that satisfy its customers.
The ability of Volt 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 is
intense and 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. Although Volt has been successful
in obtaining various short and long-term contracts in the past, with concomitant
increases in revenues, 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. The segment faces intense competition for all of its
services. Some of this segment's significant competitors are companies that are
larger and have substantially greater financial resources than Volt.
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 from a concentration on production and systems used in
the production of phone directories to the publishing of telephone directories.
This segment consists of DataNational, Directory Systems/Services, the Uruguay
division and Volt VIEWtech.
-10-
<PAGE>
DataNational
DataNational, Volt's independent telephone directory publisher,
principally publishes community-based directories in various states,
primarily in the mid-Atlantic and southeastern portions of the United
States. DataNational offers community-based directories that provide
consumers with information concerning businesses that provide services
within their local geographic area. The directories also include features
that are unique to the community, such as school information, maps and a
calendar of events. The division identifies markets where demographics and
local shopping patterns are favorable to the division's community-oriented
product and expands accordingly. During fiscal 2001, the division
published 108 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
they enable them to specifically target their local markets at a much
lower cost.
Directory Systems/Services
Directory Systems/Services markets telephone directory systems and
services to directory publishers, using computer systems manufactured by
others, combined with 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 through-put and control. These systems are
licensed to, and the services are performed for, publishers and others
worldwide, as well as for the Company's DataNational division.
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.
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 with Antel originally entered into in
1983 and subsequently extended through 2006. Revenues are generated from
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 other publishers in Argentina,
Brazil and other South American countries. In addition, the facility does
commercial printing, including daily and weekly newspapers, magazines and
periodicals for various customers in Uruguay and elsewhere in South and
Central America.
-11-
<PAGE>
Volt VIEWtech
Volt VIEWtech services the energy and water utility industry, 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 and EPA Energy Star sponsorship.
These loans are immediately resold, after closing, to Fannie Mae. VIEWtech
is a leading utility rebate processing firm, processing energy and water
efficient appliance and home improvement rebates on behalf of utilities
across the nation. VIEWtech also contracts with major energy utilities for
HomeVIEW(TM) and WaterVIEW(TM) internet-based customer services, which
provide energy and water usage and energy-related home improvement payback
analysis.
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 economic conditions.
Although Volt continues its investment in research and development for this
segment, there is no assurance that this segment's present or future services
will be competitive, that the segment will continue to develop new services or
that present services or new services will continue to be successfully marketed.
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, 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
Telecommunications Services Segment
Volt's Telecommunications Services segment provides telecommunications and other
services, including design, engineering, outside plant construction,
installation and maintenance, removals and distribution of telecommunications
products to the outside plant and central office of telecommunications and cable
companies, and within end user premises throughout the United States and in
Europe. This segment consists of Volt Telecommunications Group, Voltelcon,
Advanced Technology Services and Volt Telecom Europe.
This segment is an international, 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 for copper, coaxial and fiber systems, carrier
systems design, conduit design, computer aided design drafting,
-12-
<PAGE>
digitizing records, building industry consultant engineering, turnkey
design, program management, air pressure design and record verification.
o Construction services, including both aerial and underground construction
services, using the Company's own vehicles and equipment. These include
jack and bore, directional boring, excavation for conduit and manhole
systems, cable replacement 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. Because much of the business is performed outdoors, operations
have been, and could in the future, be adversely affected by weather
conditions.
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, via copper wiring and fiber optics, for voice, data
and video, to operating telephone companies, long distance carriers,
telecommunications equipment manufacturers, cable companies and large
end-users.
o Central Office 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 miscellaneous services, such as grounding
surveys and asset management.
o Wireless services, including partial or complete turnkey services to
cellular and Personal Communication Services (PCS) license holders to
establish or enhance their network infrastructure, design, engineering and
construction/installation services to the fixed and mobile wireless
industry, 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 installs digital subscriber lines and 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. In addition, the segment is also responsible 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 and central office, 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, 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. Some of this segment's significant competitors are
larger and have substantially greater financial resources than Volt. Other
competitors are small, local companies that generally have lower overhead.
Volt's ability to compete in this segment depends upon its reputation, technical
capabilities, 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.
-13-
<PAGE>
A portion of Volt's business in this segment is obtained through the submission
of competitive proposals for contracts that typically expire within one year and
upon expiration are re-bid. 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, 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. The continued delay in
telecommunications companies' capital expenditure projects during the current
economic conditions 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 economy begins to recover.
Computer Systems Segment
The Computer Systems segment provides directory assistance services, and
designs, develops, sells, leases and maintains computer-based directory
assistance outsourcing services and other database management and
telecommunications systems and related services, to the telecommunications
industry. It also provides third-party IT services to others. This segment is
comprised of two business units: VoltDelta Resources ("VoltDelta") and Maintech.
VoltDelta
VoltDelta markets information services solutions to telephone companies
and inter-exchange carriers worldwide. VoltDelta has transitioned its
business from the sale of systems to an Application Service Provider model
so that it now provides information services, including infrastructure and
database content, on a transactional use fee ("ASP") basis.
To meet the needs of customers who desire to upgrade their operator
services capabilities by procuring outside 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
service is marketed as DirectoryExpress; 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.
As an adjunct to DirectoryExpress, VoltDelta's InfoExpress service permits
its transaction-based customers to offer operator assisted yellow pages,
directional and other enhanced directory assistance capabilities. These
are designed to provide directory assistance operators worldwide access to
over 160 million United States and Canadian business, residential and
government listings. 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. 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 to
live operators over Wireless Access Protocol (WAP), via the Internet and,
more recently, through voice portals using speech recognition
technologies.
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 and Italy, through its wholly-owned European subsidiary, VoltDelta
Europe.
-14-
<PAGE>
Although VoltDelta was successful during fiscal year 2001 in obtaining new
customers for these services, including several major telephone companies
in the long distance and cellular markets, there can be no assurance that
it will continue to be successful in marketing these services to
additional customers, or that the customer's 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 is
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 is purchased as needed and is readily
available from a number of suppliers.
Maintech
Maintech provides managed computer system and LAN/WAN services to mid-size
and large corporate clients and to Volt across the United States. Its
target markets include banking, brokerage, telecommunications and
aerospace. Maintech's services portfolio includes three groups of
interrelated services:
o Hardware Maintenance services, which includes fault analysis and
repair of PC and UNIX-based servers and workstations that customers
have purchased from vendors such as Compaq, SUN, IBM, Dell and
Hewlett Packard. These services are targeted to mission critical
operating environments such as Wall Street trading desks, electronic
funds transfer providers, R&D laboratories and 411 Directory
Assistance systems. Maintech provides complete maintenance support
programs on a 24 x 7 x 365 basis with available on-site, 2 hour or 4
hour response terms.
o Network Operations Center ("NOC") services, which include 24 x 7
monitoring and management of LAN/WAN environments from Maintech's
dual NOCs in Orange, California and Wallington, New Jersey. Both
NOCs are staffed with network design and support engineers, holding
certifications from Cisco, Nortel, Novell, Microsoft and other
network product vendors. The NOCs employ state-of-the-art diagnostic
monitoring and management software, including HP Open View, Concord
E-Health Suite, Visual Uptime, Nortel Optivity, Net Reality and
other popular packages.
o Technology Refresh services, which includes providing workstation
and server upgrades, asset management, product integration and
testing, and installation and facility planning.
In addition to services provided to its clients, Maintech is also
responsible for the design, installation and support of the more than
3,500 user Volt corporate WAN. This international network, which links all
Volt operating units, is the backbone of Volt's e-commerce and internal
administration and accounting functions. Maintech supports the Volt
corporate WAN through its NOCs providing such services as Help Desk,
E-Mail administration, Internet/Intranet services, system and network
administration and security. Maintech also provides application-hosting
services for Volt production systems, including VoltDelta's
DirectoryExpress and InfoExpress.
Maintech maintains its headquarters in Wallington, New Jersey and has
district offices in major metropolitan areas.
-15-
<PAGE>
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 the segment'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 2001, while others were renewed and
new contracts were awarded to the Company. Other contracts are scheduled to
expire in 2002 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, 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.
Joint Venture
In fiscal 1998, Volt and TELUS Advertising Services, a wholly owned subsidiary
of TELUS Corporation, formed a joint venture for the publishing of community
telephone directories. The joint venture publishes a total of thirteen
directories. Additional acquisitions by the joint venture have been suspended.
For further information concerning the Company's operations and joint ventures,
see Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note G of Notes to Consolidated Financial Statements in Items 7
and 8, respectively, of this Report.
Research, Development and Engineering
During fiscal years 2001, 2000 and 1999, the Company expended approximately $2.5
million, $2.4 million and $2.7 million, respectively, on research, development
and engineering, substantially all of which is Company sponsored. The major
portion of research and development expenditures was incurred by the Computer
Systems segment.
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 that of any
segment.
Customers
There were no customers with sales that represented over 10% of the Company's
consolidated sales in either fiscal 2001 or fiscal 2000. However, one customer
represented 14% of the Company's consolidated sales in fiscal 1999. In fiscal
2001, the Telecommunications Services segment's sales to four customers
represented approximately 23%, 17%, 13% and 12%, respectively, of the total
sales of that segment; and the Computer Systems segment's sales to one customer
represented approximately 35% of the total sales of that segment. In the event
that there was
-16-
<PAGE>
a loss of one or more of these customers, unless the business is replaced by the
segment, there could be 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 Company taken as a whole.
Seasonality
Historically, the Company's results of operations have been lowest in its first
fiscal quarter as a result of reduced requirements for its staffing services
personnel due to the holiday season and its directory publishing schedules. 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, and
the revenues and profits of that segment's DataNational division are lower in
the Company's first fiscal quarter due to the seasonality of its directory
publishing schedule.
Employees
During the week ended November 4, 2001, Volt employed approximately 31,000
persons, including approximately 26,000 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.
Certain services rendered by Volt's Telephone Directory and Computer Systems
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.
The Company believes that its relations with its employees are satisfactory.
Regulation
The Company's business is not subject to specific industry government
regulations. 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.
-17-
<PAGE>
ITEM 2. PROPERTIES
The Company occupies a 38,000 square foot 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:
<TABLE>
<CAPTION>
Sq. Ft.
Leased If Leased,
Or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ----- ----------
<S> <C> <C> <C>
Anaheim, Telephone Directory 39,000 Owned
California Telecommunications Services
El Segundo, Staffing Services 20,000 Owned
California Telecommunications Services
Orange, West Region Headquarters 200,000 Owned (1)
California Accounting Center
Staffing Services
Telephone Directory
Computer Systems
San Diego, Staffing Services 20,000 Owned
California
Thousand Oaks, Leased to Autologic Information
California International, Inc. 134,000 Owned (2)
Blue Bell, Telephone Directory 47,000 2007
Pennsylvania Computer Systems
Norcross, Staffing Services 13,000 2005
Georgia Telecommunications Services
Indianapolis, Telephone Directory 16,000 2003
Indiana Technical Services and
Temporary Personnel
Westbury, Corporate MIS 12,000 2004
New York
Wallington, Computer Systems 32,000 2003
New Jersey
</TABLE>
-18-
<PAGE>
ITEM 2. PROPERTIES--Continued
<TABLE>
<CAPTION>
Sq. Ft.
Leased If Leased,
Or Year of Lease
Location Business Segment Owned Expiration
- -------- ---------------- ----- ----------
<S> <C> <C> <C>
Montevideo, Telephone Directory 96,000 2004
Uruguay
Chantilly, Telephone Directory 11,000 2005
Virginia Staffing Services
Redmond, Staffing Services 46,000 2010
Washington
Edison, Telecommunications Services 42,000 2005
New Jersey
Sunbury on Thames, Computer Systems 14,000 2007
England
Redhill, Staffing Services 12,000 2011
England
</TABLE>
(1) See Note E of Notes to Consolidated Financial Statements for information
regarding a term loan secured by these properties.
(2) The Company leases its Thousand Oaks, California facility to Autologic
under a lease that expires on December 31, 2002 and which contains an
option to extend through June 30, 2003.
In addition, the Company leases space in approximately 280 other facilities
worldwide (excluding month-to-month rentals), each of which consists of less
than 10,000 square feet. These leases expire at various times from 2002 until
2011.
At times, the Company leases space to others in the buildings which it owns or
leases, if it does not require the space for its own business.
The Company believes that its facilities are adequate for its presently
anticipated requirements and that it is not dependent upon any individually
leased premises.
For additional information pertaining to lease commitments, see Note O of Notes
to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
-19-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers
WILLIAM SHAW, 77, a founder of the Company, has been President and Chairman of
the Board of the Company since its inception and has been employed in executive
capacities by the Company and its predecessors since 1950.
JEROME SHAW, 75, a founder of the Company, has been Executive Vice President and
Secretary of the Company since its inception and has been employed in executive
capacities by the Company and its predecessors since 1950.
JAMES J. GROBERG, 73, 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, 42, 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, 59, 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, 47, has been Senior Vice President of the Company since March 2001
and has been employed in executive capacities by the Company since 1980.
JACK EGAN, 52, 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, 53, has been Vice President - Accounting Operations since
January 1992 and has been employed in executive capacities by the Company since
1986.
LUDWIG M. GUARINO, 50, has been Treasurer of the Company since January 1994 and
has been employed in executive capacities by the Company since 1976.
NORMA J. KRAUS, 70, 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.
-20-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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 4, 2001:
<TABLE>
<CAPTION>
2001 2000
-------------------------------- --------------------------------
Fiscal Period High Low High Low
- ------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $25.94 $18.19 $27.44 $18.88
Second Quarter 28.10 16.60 39.88 23.50
Third Quarter 19.40 16.44 38.13 28.88
Fourth Quarter 17.80 10.50 36.63 19.25
</TABLE>
As of January 11, 2002, there were approximately 435 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 has
agreements, which contain financial covenants, one of which requires the Company
to maintain consolidated net worth of at least $230.0 million plus 50% of
consolidated net income for the fiscal year being measured and limits dividends
in any fiscal year to 25% of the prior year's consolidated net income.
Therefore, the amount available for dividends at November 4, 2001 was $1.5
million.
-21-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended (Notes 1 and 2)
--------------------------------------------------------------------------------------
November November October October October
4, 2001 3, 2000 29, 1999 30, 1998 31, 1997
------------ ------------ ------------ ----------- ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales $ 1,932,261 $ 2,120,265 $ 2,068,684 $ 1,621,375 $ 1,317,276
============ ============ ============ =========== ============
Income from continuing operations--Note 3 $ 6,658 $ 31,402 $ 31,492 $ 20,232 $ 39,890
Discontinued operations--Note 4 (814) (697) (2,533) 671 (40)
------------ ------------ ------------ ----------- ------------
Net Income $ 5,844 $ 30,705 $ 28,959 $ 20,903 $ 39,850
============ ============ ============ =========== ============
Per Share Data
Basic:
Income from continuing operations $ 0.44 $ 2.08 $ 2.10 $ 1.36 $ 2.71
Discontinued operations (0.06) (0.05) (0.17) 0.04 --
------------ ------------ ------------ ----------- ------------
Net Income $ 0.38 $ 2.03 $ 1.93 $ 1.40 $ 2.71
------------ ------------ ------------ ----------- ------------
Weighted average number of shares 15,212,076 15,139,483 15,023,046 14,917,846 14,707,055
============ ============ ============ =========== ============
Diluted:
Income from continuing operations $ 0.44 $ 2.05 $ 2.08 $ 1.33 $ 2.63
Discontinued operations (0.06) (0.05) (0.17) 0.04 --
------------ ------------ ------------ ----------- ------------
Net Income $ 0.38 $ 2.00 $ 1.91 $ 1.37 $ 2.63
============ ============ ============ =========== ============
Weighted average number of shares 15,244,350 15,315,957 15,152,612 15,253,665 15,182,240
============ ============ ============ =========== ============
Total assets $ 637,236 $ 744,828 $ 618,329 $ 469,326 $ 418,722
Long-term debt, net of current portion $ 35,993 $ 32,297 $ 45,728 $ 54,048 $ 55,447
</TABLE>
Note 1--Fiscal years 1997 through 1999 and 2001 were comprised of 52
weeks, while fiscal year 2000 was comprised of 53 weeks.
Note 2--Cash dividends have not been paid during the five-year period
ended November 4, 2001.
Note 3--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 and fiscal 1998, the Company recognized $2.0 million, or
$0.13 per share and $500,000, or $0.03 per share, respectively, 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. During fiscal years 1999 and 1998, the
venture repaid substantially all of its obligations.
Fiscal 1997 included a gain of $12.8 million ($7.9 million, net of
taxes, or $0.52 per share) on the sale of the Company's interest in an
Australian joint venture and a loss of $3.0 million ($1.8 million, net
of taxes, or $0.12 per share) on the write-down of investments.
Note 4--On September 25, 2001, the Company's 59% owned publicly-held
subsidiary, Autologic Information International, Inc. ("Autologic"),
entered into an agreement for Agfa Corporation, a subsidiary of
Agfa-Gevaert N.V., to acquire all of Autologic's outstanding shares
through a tender offer and subsequent merger. The tender offer was
completed on November 30, 2001, at which time the Company received $24.2
million for its shares. The proceeds received by the Company and the
Company's gain on the transaction, presently estimated at $2.0 million,
will be reflected in the Company's first quarter of fiscal 2002.
Accordingly, the results of operations of Autologic, the Company's
Electronic Publication and Typesetting segment, have been classified as
discontinued in the statements of income and cashflows for all the prior
periods and Autologic's assets and liabilities have been included as
separate line items on the Company's fiscal 2001 balance sheet.
-22-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information which appears below relates to prior periods. The results of
operations for those periods are not necessarily indicative of the results which
may be expected for any subsequent periods. Management has made no predictions
or estimates as to future operations and no inferences as to future operations
should be drawn.
The following discussion should be read in conjunction with the 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.
On September 25, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), entered into an
agreement for Agfa Corporation, a subsidiary of Agfa-Gevaert N.V., to acquire
all of Autologic's outstanding shares through a tender offer and subsequent
merger. The tender offer was completed on November 30, 2001, at which time the
Company received $24.2 million for its shares. The proceeds received by the
Company and the Company's gain on the transaction, presently estimated at
approximately $2.0 million, will be reflected in the Company's first quarter of
fiscal 2002. Accordingly, the results of operations of Autologic, the Company's
Electronic Publication and Typesetting segment are not separately discussed here
as they have been classified as discontinued in the statements of income and
cashflows for all the prior periods and Autologic's assets and liabilities have
been included as separate line items on the Company's fiscal 2001 balance sheet.
Fiscal Year 2001 (52 weeks) Compared to Fiscal Year 2000 (53 weeks)
Results of Operations - Summary
Net sales decreased by $188.0 million, or 9%, to $1.9 billion in fiscal 2001.
This decrease resulted primarily from a decrease in sales by the Staffing
Services segment of $150.4 million and by the Telecommunications Services
segment of $47.2 million.
The Company's income from continuing operations before income taxes decreased by
$40.9 million, or 79%, to $11.0 million in fiscal 2001. The operating profit of
the Company's segments decreased by $39.9 million, or 52%, to $36.9 million in
fiscal 2001. While operating profits of the Staffing Services and
Telecommunications Services segments decreased, an increase in the Computer
Systems segment's operating profit and a return to profitability by the
Telephone Directory segment partially offset these decreases.
Consolidated results for 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), a net gain on the sale of certain securities, net of a write-down
of other securities, of $5.6 million ($3.4 million, net of taxes) and a loss
from discontinued operations of $0.8 million, ($0.7 million in fiscal 2000).
Net income in fiscal 2001 was $5.8 million, compared to net income of $30.7
million in fiscal 2000.
-23-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2001 Compared to Fiscal Year 2000--Continued
Results of Operations - Segments
Sales of the Staffing Services segment decreased by $150.4 million, or 9%, to
$1.5 billion in fiscal 2001 and the segment's operating profit in fiscal 2001
decreased by $39.0 million, or 70%, to $16.6 million, from $55.5 million in
fiscal 2000. The Commercial and Light Industrial division accounted for 77% of
the sales decline and approximately two-thirds of the decline in the segment's
operating profit. The balance of the reduction was in the Technical Placement
division.
The Commercial and Light Industrial division of the Staffing Services segment
was adversely affected by the nation's economic decline, with sales declining
19% from fiscal 2000. The division sustained a loss of $11.0 million on sales of
$481.6 million during fiscal 2001 versus an operating profit of $15.3 million on
sales of $597.3 million in fiscal 2000. Traditional temporary recruited revenue
of the division, excluding lower margin managed service and professional
employer services ("PEO") revenue, declined to $431.9 million in fiscal 2001
from $558.0 million in fiscal 2000. The division's results were also adversely
affected by the added branch and infrastructure overhead that the division
incurred, primarily in fiscal 2000, based on the growth in traditional temporary
recruited revenue that the division had experienced that year and in
anticipation of continued growth, further adversely affected the division's
performance.
The Staffing Services segment's Technical Placement division reported sales of
$1.1 billion in fiscal 2001, a 2% decrease from fiscal 2000. In fiscal 2001,
Technical Placement operating profit was $27.6 million, compared with $40.2
million in fiscal 2000. Increased overhead associated with the opening of
additional project management outsourcing facilities, branch and infrastructure
expenses incurred in contemplation of a continuation of fiscal 2000's increased
revenues, a sharp reduction in higher margin permanent placement fees, a
reduction in higher margin sales to a major customer and costs associated with
the development and implementation of new ProcureStaff services all negatively
impacted operating results.
The Staffing Services segment has implemented a series of cost cutting
initiatives, including branch office closings, which reduced fiscal 2001 fourth
quarter overhead by 13% from the fourth quarter of the prior fiscal year, with
Commercial and Light Industrial fiscal 2001 fourth quarter overhead expenses
declining 19% and Technical Placement overhead declining 9%. While the segment
is committed to continued cost controls designed to increase profitability for
fiscal 2002, a return to substantially higher profit levels is likely to depend
on the timing of the general economy's recovery. Although the markets for the
segment's services include a broad range of industries throughout the United
States, general economic difficulties in specific geographic areas or industrial
sectors have in the past, and could in the future, affect the profitability of
the segment.
The Telephone Directory segment's sales increased by $2.2 million, or 2%, to
$99.9 million in fiscal 2001 and its operating profit was $2.2 million compared
to a loss of $3.2 million in fiscal 2000. The improved results of the segment
were primarily due to the reorganization and restructuring of its DataNational
division, a publisher of community directories, and the absence in fiscal 2001
of a charge of $0.8 million for a customer receivable deemed uncollectable due
to a bankruptcy filing in fiscal 2000. While the Company believes that
investments made and initiatives implemented will continue to enable the segment
to return to higher profit levels, there can be no assurances that this will, in
fact, occur. Other than DataNational, a substantial portion of the
-24-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2001 Compared to Fiscal Year 2000--Continued
Results of Operations - Segments--Continued
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, 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. This segment's
sales and profitability are highly dependent on advertising revenue, which has
been and continues to be affected by general economic conditions.
The Telecommunications Services segment's sales decreased by $47.2 million, or
16%, to $248.9 million in fiscal 2001 and its operating profit decreased by
$12.4 million, or 63%, to $7.4 million in fiscal 2001. The continued delay in
telecommunications companies' capital expenditure projects during the current
economic deceleration 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 economy begins to recover. While higher margin project
work increased gross margins as a percentage of sales, lower sales volume and
increased overhead costs associated with the expansion of the segment's Central
Office division reduced the segment's overall profitability. A substantial
portion of the business in this segment is obtained through the submission of
competitive proposals for contracts that typically expire within one year and
upon expiration are re-bid. While management 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, 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.
The Computer Systems segment's sales increased by $8.2 million, or 13%, to $71.3
million in fiscal 2001 and its operating profit increased by $6.0 million, or
127%, to $10.7 million in fiscal 2001. Continued expansion of the segment's
Application Service Provider ("ASP") directory assistance and web-based
information service, together with the delivery and customer acceptance of
technology projects, contributed to the increase in sales. ASP directory
assistance transactions totaled 275 million in fiscal 2001, a 40% increase over
fiscal 2000. The higher sales, operational process improvements, cost control
initiatives and the use of vendor credits resulted in a significant increase in
profit margins. This segment's results are highly dependent on the volume of
directory assistance calls to the segment'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 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 increased by $9.8 million, or 13%, to $83.1
million in fiscal 2001 to support increased sales activities during the first
half of the year and as a result of higher financial reporting
-25-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2001 Compared to Fiscal Year 2000--Continued
Results of Operations - Other--Continued
system expenses related to a new accounting and back office system installed to
provide enhanced financial, accounting, human resources, customer and management
reporting necessary for the growth of the Company. Financial reporting system
expenses, which include equipment rental and the use of outside consultants,
will be reduced as the Company has replaced consultants with in-house employees.
Total selling and administrative expenses, expressed as a percentage of sales,
were 4.3% in fiscal 2001 and 3.5% in fiscal 2000.
Research, development and engineering expenses increased to $2.5 million from
$2.4 million in fiscal 2000. The increase was primarily due to product
development expenses in the Computer Systems segment.
Depreciation and amortization increased by $3.6 million, or 17%, to $24.6
million in fiscal 2001. The fiscal 2001 increase was primarily attributable to
amortization of the new financial reporting system, which is being amortized
over five to seven years, partially offset by a $0.3 million reduction in
amortization of goodwill. See "The Effect of New Accounting Pronouncements,"
below, for information regarding the effects of the implementation of Statement
of Financial Accounting Standards ("SFAS") Nos. 141 and 142 on the Company's
financial statements commencing with the first quarter of fiscal 2002.
Other loss decreased to $18,000 in fiscal 2001 from $0.6 million in fiscal 2000.
In fiscal 2000, other loss was due to a variety of expenses, including the
Company's share in start-up losses of its new joint venture, westVista
Advertising Services.
In fiscal 2001, the Company recognized a pre-tax gain on the sale of securities
of $6.3 million, 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 (see
Note B of Notes to Consolidated Financial Statements). 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 (see Note I of Notes to
Consolidated Financial Statements).
A foreign exchange loss of $0.2 million was recognized in fiscal 2001, compared
with a gain of $0.6 million in fiscal 2000. The losses were due to unfavorable
currency movements in the European currency markets. To reduce the potential
adverse impact from foreign currency changes on the Company's foreign currency
receivables, sales and firm commitments, foreign currency options are purchased
during and settled generally on the last day of each quarter.
Interest expense increased by $2.0 million, or 20%, to $11.9 million in fiscal
2001. The increase is the result of the Company borrowings under its revolving
credit agreements to support the increased working capital requirements of the
Company. In September 2001, the Company replaced its two primary revolving
credit facilities with one new facility (see Note D of the Notes to the
Condensed Consolidated Financial Statements and "Liquidity and Sources of
Capital", below). The new arrangement, which extends the credit line's maturity,
increased the variable interest rates applicable to future borrowings from rates
in effect under the agreements it
-26-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2001 Compared to Fiscal Year 2000--Continued
Results of Operations - Other--Continued
replaces. Since short-term interest rates have decreased, the Company's
effective interest rates have been reduced. The Company's Uruguayan division
borrows in that currency to hedge its foreign exchange exposure. The current
economic conditions in neighboring Argentina have had a significant impact in
Uruguay, resulting in higher interest rates. In fiscal 2001, the Company
borrowed an average of the equivalent of $3.3 million and incurred interest
expense of $0.8 million. Interest rates have doubled over the past several
months. However, the higher devaluation band recently set by the government
should mitigate the higher rates.
Total debt was reduced in the fiscal year by $76.0 million, including $38.8
million in the fourth quarter of fiscal 2001. The Company has notified the
holders of its 7.92% Senior Notes that the Company will redeem the $30.0 million
outstanding principal amount of its Senior Notes on March 5, 2002.
The Company's effective tax rate increased to 39.6% in fiscal 2001 from 39.5% in
fiscal 2000.
The loss from discontinued operations reflects the results of operations of
Autologic, the sale of which is discussed above.
Fiscal Year 2000 (53 weeks) Compared to Fiscal Year 1999 (52 weeks)
Results of Operations - Summary
Net sales in fiscal 2000 increased by $51.6 million, or 2.5%, to $2.1 billion in
fiscal 2000. The increase resulted primarily from an increase in sales by the
Telecommunications Services segment of $108.4 million, which was partially
offset by decreases in sales for the other three segments.
The Company's income from continuing operations before taxes increased by $1.5
million, or 3%, to $51.9 million in fiscal 2000. The operating profit of the
Company's segments increased by $8.3 million, or 12%, to $76.8 million in fiscal
2000. While the Staffing Services segment, the Telecommunications Services
segment and the Computer Systems segment increased their operating profits, an
operating loss in the Telephone Directory segment partially offset these
improvements.
Consolidated fiscal 1999 results included recognition of a previously deferred
gain on the sale of a joint venture of $2.0 million (see Note G of Notes to
Consolidated Financial Statements of this Report).
Net income in fiscal 2000 was $30.7 million, compared to net income of $29.0
million in fiscal 1999.
-27-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2000 Compared to Fiscal Year 1999--Continued
Results of Operations - Segments
Sales of the Staffing Services segment decreased by $25.5 million, or 1%, while
its operating profit increased by $11.7 million, or 27%, to $55.5 million,
compared with $43.8 million in fiscal 1999. The sales decrease was caused by a
reduction in Managed Services revenue of $194.9 million, or 40%, 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 associated with such revenue being excluded from sales, as well as a
reduction in the use of associate vendors by one of the Company's largest
Managed Services clients. These revenue decreases were partially offset by an
increase in sales of $169.4 million, or 14%, in traditional staffing business.
Operating margins rose from 2.6% to 3.3% for the entire segment and from 3.6% to
4.0% excluding Managed Services revenue. An increased mix of higher margin
recruited business in both the Technical and Commercial and Light Industrial
divisions of the segment and strong growth in permanent placements contributed
to higher margins and higher operating profit for this segment.
The Telephone Directory segment's sales decreased by $0.6 million, or 1%, to
$97.7 million in fiscal 2000. It incurred an operating loss of $3.2 million in
fiscal 2000, compared with an operating profit of $7.3 million in fiscal 1999.
The sales decrease was primarily due to decreases in the segment's Viewtech
division sales of $2.8 million, telephone production sales of $1.9 million and
printing sales in Uruguay of $1.1 million, substantially offset by an increase
in independent directory publishing sales of $5.0 million, which included the
publication of the segment's toll-free directory. The operating loss was the
result of significantly higher expenditures for various strategic investments in
new and existing markets and a restructuring of the segment designed to increase
future advertising revenue and enhance the long-term value and profits of its
independent yellow page publishing business. Additionally, the segment's
decreased sales and a charge of $0.8 million for a Viewtech customer receivable
deemed uncollectable due to a bankruptcy filing added to the operating loss.
The Telecommunications Services segment's sales increased by $108.4 million, or
58%, to $296.1 million in fiscal 2000 compared to $187.7 million in fiscal 1999
and its operating profit increased by $5.7 million, or 40%, to $19.8 million in
fiscal 2000 compared to $14.1 million in fiscal 1999. All of the segment's
divisions reported significant increases in sales as a result of increased
revenues from long-haul fiber optic projects and cross-connect box projects, as
well as additional increased business from several major customers. The increase
in operating profit was the result of the increase in sales and a decrease in
overhead of 3.2 percentage points partially offset by a decrease in gross margin
of 4.4 percentage points primarily due to amounts recorded for cost overruns on
one of the Business Systems division's projects, a settlement of differences on
"out-of-scope" billing on a project with another customer, the completion of
certain low-margin government contract work and integration costs for the Lucent
Wired Services Division acquired in late December 1999.
The Computer Systems segment's sales decreased by $20.8 million, or 25%, to
$63.1 million in fiscal 2000 while its operating profit increased by 48% to $4.7
million from $3.2 million in fiscal 1999. The sales decrease was primarily due
to the recognition in fiscal 1999 of revenues of $25.9 million related to a
contract for an operator services system in Holland, which was accounted for
under the completed contract method of accounting. The decrease in revenue was
partially offset, and the operating profit was increased, in fiscal 2000 by an
increase in customer utilization of the segment's transaction-based
DirectoryExpress and InfoExpress
-28-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2000 Compared to Fiscal Year 1999--Continued
Results of Operations - Segments--Continued
systems, which outsource the segment's directory database to telephone
companies, as well as increased workstation and software sales.
Results of Operations - Other
Other items, discussed on a consolidated basis, affecting the results of
operations were:
Total selling and administrative expenses increased by $17.0 million, or 30%, to
$73.3 million in fiscal 2000 to support the increased sales activities of the
Telecommunications Services segment, initiatives taken by the Telephone
Directory segment, and costs associated with a new financial reporting system.
These expenses, expressed as a percentage of sales, were 3.5% in fiscal 2000 and
2.7% in fiscal 1999. General corporate expenses, included above, increased by
10% to $14.0 million in fiscal 2000.
Research, development and engineering expenses decreased by $0.3 million, or
11%, to $2.4 million in fiscal 2000. The decrease in fiscal 2000 was primarily
due to a reduction in product development in the Computer Systems segment as new
products were completed and introduced to customers.
Depreciation and amortization increased by $1.2 million, or 6%, to $21.0
million. The increase was attributable to the amortization of intangibles due to
acquisitions made during fiscal 1999 and an increase in depreciation due to the
new financial reporting system.
Interest income decreased by $0.4 million, or 31%, to $0.9 million in fiscal
2000, primarily due to a decrease in funds available for investment.
The other loss of $0.6 million in fiscal 2000 was primarily due to an increase
in a variety of expenses, including the Company's share in the start-up losses
of its new joint venture, westVista Advertising Services.
In fiscal 1999, the Company recognized $2.0 million of a previously deferred
gain on the sale in fiscal 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 Uruguayan division and guaranteed the
venture's obligations with respect to certain import financing. Therefore, the
Company had deferred the gain on the sale. During fiscal 1999, the venture
repaid substantially all of the balance of its obligations.
The foreign exchange gain in fiscal 2000 was $0.6 million, compared to a loss of
$0.4 million in fiscal 1999, as a result of favorable currency movements in the
European markets. To reduce the potential adverse impact from foreign currency
changes on the Company's foreign receivables, sales and firm commitments,
foreign currency options are purchased during and settled generally on the last
day of each quarter.
-29-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Fiscal Year 2000 Compared to Fiscal Year 1999--Continued
Results of Operations - Other--Continued
Interest expense increased by $2.1 million, or 27%, to $9.9 million in 2000. The
increase is the result of higher borrowings under the Company's revolving credit
agreements to finance the December 1998 acquisition of Volt Europe and to
support the increased working capital requirements of the Company and, to a
lesser extent, higher interest rates.
The Company's effective tax rate was 39.5% in fiscal 2000 compared to 37.6% in
fiscal 1999. The lower effective tax rate in fiscal 1999 resulted from the
non-taxable gain on the sale of a Brazilian joint venture.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $15.6 million in fiscal 2001 to $18.5
million at the end of the fiscal year. This included a $11.9 million decrease in
cash from the reclassification of Autologic's cash to assets held for sale as a
result of it being considered a discontinued operation.
Operating activities produced $89.3 million in cash. 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
of $27.1 million, primarily for depreciation and amortization of $24.6 million.
Changes in operating assets and liabilities produced $56.3 million of cash,
principally due to cash provided by decreases in the levels of accounts
receivable of $61.9 million and inventories of $28.4 million, partially offset
by $29.6 million of expenditures to reduce the level of accounts payable, a
decrease in customer advances and other liabilities of $3.5 million and a $6.7
million reduction in net income taxes payable.
The principal factor in cash applied to investing activities of $16.7 million
was the expenditure of $27.1 million for property, plant and equipment,
partially offset by $7.3 million received from the sale of investments and $4.0
million in proceeds from the sale of a partnership interest.
The principal factors in cash applied by financing activities of $76.0 million
were a decrease of $77.6 million in bank loans and the repayment of $13.7
million of long-term debt, partially offset by $15.1 million in proceeds from a
new loan agreement.
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 anticipated to be approximately $16.0 million, of which $5.1 million has been
incurred to date. The Company has no other material capital commitments.
At November 4, 2001, the Company had $139.9 million of credit lines with various
domestic and foreign banks, which provide for unsecured borrowings and letters
of credit, of which $127.5 million was under a revolving credit
-30-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Liquidity and Capital Resources--Continued
agreement that expires in September 2002. The Company had outstanding bank
borrowings of $65.8 million at November 4, 2001 under these lines (see Note D in
the Notes to Consolidated Financial Statements). On November 30, 2001, in
accordance with the revolving credit agreement, the $127.5 million credit line
was reduced to $115.5 million as a result of the sale of Autologic.
The Company believes its current financial position, working capital, credit
lines and future cash flows will be sufficient to fund its presently
contemplated operations and satisfy its debt obligations. The Company intends to
seek additional financing to further its ability to expand its business.
However, there can be no assurance that the Company will be able to obtain such
financing or the terms of financing that may be available (see "Certain Other
Fiscal 2002 Events," below).
The Effect of New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141"),
and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), effective for
fiscal years beginning after December 15, 2001. Under the new rules, goodwill
will no longer be amortized but will be subject to annual impairment tests in
accordance with SFAS 142. Other intangible assets will continue to be amortized
over their useful lives. The Company has elected to apply the new rules on
accounting for goodwill and other intangible assets beginning in the first
quarter of fiscal 2002. Application of the non-amortization provisions of SFAS
142 is expected to result in an increase in net income of approximately $2.3
million ($0.15 per share) in fiscal 2002. During fiscal 2002, the Company will
perform the first of the required impairment tests of goodwill and indefinite
lived intangible assets as of November 5, 2001. At November 4, 2001, the
Company's goodwill, related to prior acquisitions, amounted to approximately
$40.0 million. While the Company's revaluation under the new accounting rules
has not been completed, it is likely that there could be a material write-down
due to indications of impairment, reflecting declines in market value of the
acquisitions since they were purchased. The charge for the write-down, to the
extent required, will be reported as a Cumulative Effect of a Change in
Accounting in the first quarter of 2002.
Certain Other Fiscal 2002 Events
In January 2002, the Company received a commitment from a major bank to enter
into a three-year accounts receivable securitization program which, assuming
completion, will provide for the financing of up to $100 million of certain
accounts receivable. The securitization should permit the Company to reduce its
drawings and dependence on its existing $115.5 million revolving credit
facility. As of February 3, 2002, less than $15.0 million was drawn under that
facility, primarily for Pound Sterling borrowings in connection with the
Company's European operations. The Company is also discussing an amendment and
extension of the revolving credit facility, which currently expires on September
9, 2002. The Company expects to be successful in such negotiations, however no
assurance can be given that it will be successful.
-31-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS--Continued
Certain Other Fiscal 2002 Events--Continued
Due to the seasonality of its business, compounded by current general economic
conditions, the Company currently expects to report an operating loss in the
first quarter of fiscal 2002. In order for the Company to be in a position to
implement the proposed receivable securitization program, in lieu of seeking
amendments to the covenants contained in the agreements under which the 7.92%
Senior Notes are issued to permit the securitization and other amendments that
may have become required, depending upon the size of the first quarter loss, the
Company determined to prepay the remaining $30.0 million of its Senior Notes
that otherwise would have been due in equal annual installments over the next
two and one-half years. The Company has notified the noteholders that it will
prepay all of the Senior Notes on March 5, 2002. In connection with the
prepayment of the Senior Notes, the Company and the bank lenders under the
Company's revolving credit agreement amended, effective February 1, 2002,
various covenants in that agreement. The Company also agreed to secure its
obligations under the revolving credit agreement with certain accounts
receivable (the level of which at November 4, 2001 was approximately $70.0
million) unrelated to those to be used in the proposed securitization no later
than the date the Senior Notes are repaid. The Company believes that it will
remain in compliance with the amended covenants under the revolving credit
agreement throughout its remaining term.
The proposed new securitization program along with the prepayment of the Senior
Notes are expected to substantially reduce the Company's financing charges
(interest and other expense) in the future, but the Company will pay a "make
whole" premium on the prepayment of the Senior Notes that is expected to
approximate $2.0 million. As a result the Company will incur an extraordinary
pre-tax charge in the amount of the premium in the second fiscal quarter of
fiscal 2002 for the extinguishment of that debt. The Company has reflected the
outstanding principal amount of the Senior Notes as a current liability at
November 4, 2001 in its fiscal 2001 balance sheet. The Company believes that its
present, as well as its contemplated, financing structure will provide adequate
liquidity for its anticipated operations.
-32-
<PAGE>
ITEM 7A- QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk exposure in the following areas:
Interest Rate Market Risk
The Company has cash equivalents on which interest income is earned at variable
rates. The Company also has credit lines with various domestic and foreign
banks, which provide for unsecured borrowings and letters of credit up to an
aggregate of $139.9 million at November 4, 2001 ($127.9 million since November
30, 2001). At November 4, 2001, the Company had borrowings totaling $65.8
million outstanding under these agreements. The interest rates on these
borrowings are variable and, therefore, interest expense and interest income are
affected by the general level of U.S. and foreign interest rates. Increases in
interest expense resulting from an increase in interest rates could impact the
Company's results of operations. For example, a 1% increase in prevailing
interest rates could cause interest expense to increase by $0.5 million. The
Company's policy is to take actions that would mitigate such risk when
appropriate. The Company's Uruguayan division, which sells advertising in local
currency, borrows in that currency to hedge its foreign exchange exposure. The
current economic conditions in neighboring Argentina have had a significant
impact in Uruguay, resulting in higher interest rates. In fiscal 2001, the
Company borrowed an average of the equivalent of $3.3 million and incurred
interest expense of $0.8 million. Interest rates have doubled over the past
several months. However, the higher devaluation band recently set by the
government should mitigate the higher rates.
The Company's total long-term debt of $47.4 million at November 4, 2001 consists
of borrowings at fixed interest rates, and the Company's interest expense
related to these borrowings is not exposed to changes in interest rates in the
near term. In March 2000, the Company entered into a series of interest swap
agreements, which effectively converted $40.0 million of long-term debt, through
maturity, from fixed to floating rate debt. Therefore, interest expense on the
debt was affected by the general level of interest rates. However in December
2000, the Company terminated the swap agreements. The fair value of the
agreements at termination of $0.5 million was paid to the Company and is
reducing interest expense over the remaining term the notes are outstanding. The
Company has notified the holders of $30.0 million of its long-term debt (which
was the subject of the swap agreements) of its intention to redeem that debt on
March 5, 2002 (see "Management's discussion of Financial Condition and Results
of Operations," in Item 7 of this Report).
The Company holds short-term investments in mutual funds for the Company's
deferred compensation plan, and non-current investments consisting of a
portfolio of equity securities. The total market value of these investments was
$3.8 million at November 4, 2001, substantially all of which are held for the
benefit of participants in a non-qualified deferred compensation plan with no
risk to the Company.
Foreign Exchange Market Risk
The Company has a number of overseas subsidiaries and is, therefore, subject to
exposure from the risk of currency fluctuations as the value of the foreign
currency fluctuates against the dollar, which may impact reported earnings. The
Company attempts to reduce this risk by utilizing foreign currency option and
exchange contracts designed to hedge the adverse impact on foreign currency
receivables and sales when the dollar strengthens against the related foreign
currency. At November 4, 2001, the Company held foreign currency option
contracts in the aggregate notional amount of $0.5 million, which approximated
its exposure in foreign currencies at that date. The Company does not believe
that it is exposed to material foreign exchange risk.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-33-
<PAGE>
ERNST & YOUNG LLP 787 Seventh Avenue Phone #: 212-773-3000
New York, New York 10019
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Volt Information Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Volt Information
Sciences, Inc. and subsidiaries as of November 4, 2001 and November 3, 2000 and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended November 4, 2001. Our
audits also included the financial statement schedule listed in the Index at
Item 14(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 4, 2001 and November 3,
2000 and the consolidated results of their operations and their cash flows for
each of the three years in the period ended November 4, 2001, 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.
Ernst & Young LLP
December 20, 2001
Except for Note E, as to which the date is
February 1, 2002
-34-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November November
4, 2001 3, 2000
--------- ---------
(Dollars in thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note A $ 18,474 $ 34,099
Short-term investments--Notes A and B 3,778 3,570
Trade accounts receivable less allowances of $9,376 (2001) and $8,952
(2000)--Schedule II 362,784 448,812
Assets held for sale--Note I 47,635
Inventories--Notes A and C 36,186 75,729
Deferred income taxes--Notes A and F and Schedule II 8,585 12,563
Prepaid expenses and other assets 13,487 17,689
--------- ---------
TOTAL CURRENT ASSETS 490,929 592,462
Investment in joint venture--Note G 3,739 3,788
Investment in securities--Notes A and B and Schedule II 24 86
Property, plant and equipment, net--Notes A, E and K 97,147 96,325
Deposits and other assets 5,128 7,399
Intangible assets-net of accumulated amortization of $12,138 (2001) and
$25,133 (2000)--Notes A and I 40,269 44,768
--------- ---------
TOTAL ASSETS $ 637,236 $ 744,828
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks--Notes D and E $ 65,843 $ 144,054
Current portion of long-term debt--Note E 31,429 13,699
Accounts payable 114,544 148,341
Liabilities related to assets held for sale--Note I 26,313
Accrued wages and commissions 47,282 54,702
Accrued taxes other than income taxes 15,412 16,373
Accrued interest and other accruals 20,936 17,330
Customer advances and other liabilities 16,548 25,241
Income taxes--Notes A and F 2,038 8,809
--------- ---------
TOTAL CURRENT LIABILITIES 340,345 428,549
Long term debt--Note E 15,993 32,297
Deferred income taxes--Notes A and F 11,086 4,495
Minority interests 16,132
STOCKHOLDERS' EQUITY--Notes A, B, D, E, J and L 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--
15,215,665 shares (2001) and 15,208,015 shares (2000) 1,522 1,521
Paid-in capital 41,002 40,862
Retained earnings 227,766 221,922
Accumulated other comprehensive loss (478) (950)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 269,812 263,355
--------- ---------
COMMITMENTS--Note O
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 637,236 $ 744,828
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
-35-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME--Continued
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------
November November October
4, 2001 3, 2000 29, 1999
------------ ------------ ------------
(Dollars in thousands, except per share data)
<S> <C> <C> <C>
NET SALES $ 1,932,261 $ 2,120,265 $ 2,068,684
COSTS AND EXPENSES:
Cost of sales 1,809,564 1,962,738 1,935,150
Selling and administrative 83,136 73,314 56,342
Research, development and engineering 2,507 2,368 2,658
Depreciation and amortization 24,582 20,961 19,717
------------ ------------ ------------
1,919,789 2,059,381 2,013,867
------------ ------------ ------------
OPERATING PROFIT 12,472 60,884 54,817
OTHER INCOME (EXPENSE):
Interest income 877 912 1,319
Other (loss) income-net--Note G (18) (604) 447
Gain on securities-net--Note B 5,552
Gain on sale of partnership interest--Note I 4,173
Gain on sale of joint venture interest--Note G 2,049
Foreign exchange (loss) gain-net (158) 638 (428)
Interest expense (11,880) (9,891) (7,774)
------------ ------------ ------------
Income from continuing operations before income taxes 11,018 51,939 50,430
Income tax provision--Notes A and F (4,360) (20,537) (18,938)
------------ ------------ ------------
Income from continuing operations 6,658 31,402 31,492
Discontinued operations, net of taxes--Note I (814) (697) (2,533)
------------ ------------ ------------
NET INCOME $ 5,844 $ 30,705 $ 28,959
============ ============ ============
<CAPTION>
Per Share Data
--------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share:
Income from continuing operations $ 0.44 $ 2.08 $ 2.10
Discontinued operations (0.06) (0.05) (0.17)
------------ ------------ ------------
Net income $ 0.38 $ 2.03 $ 1.93
============ ============ ============
Weighted average number of shares--Note H 15,212,076 15,139,483 15,023,046
============ ============ ============
Diluted earnings per share:
Income from continuing operations $ 0.44 $ 2.05 $ 2.08
Discontinued operations (0.06) (0.05) (0.17)
------------ ------------ ------------
Net income $ 0.38 $ 2.00 $ 1.91
============ ============ ============
Weighted average number of shares--Note H 15,244,350 15,315,957 15,152,612
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
-36-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Income
-----------------------------
Common Stock Foreign Unrealized Gain
$.10 Par Value Currency (Loss) On
----------------- Paid-In Retained Translation Marketable Comprehensive
Shares Amount Capital Earnings Adjustment Securities Income
------ ------ ------- -------- ----------- --------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at October 30, 1998 15,006,164 $1,501 $37,127 $162,258 ($114) $450
Contribution to ESOP 18,172 2 408
Stock options exercised, including
related tax benefit of $15 8,110 161
Unrealized foreign currency
translation adjustment-net of taxes
of $22 52 $52
Unrealized loss on marketable
securities - net of taxes of $518 (808) (808)
Net income for the year 28,959 28,959
---------- ------ ------- -------- ----- ---- -------
Balance at October 29, 1999 15,032,446 1,503 37,696 191,217 (62) (358) $28,203
=======
Contribution to ESOP 24,939 2 556
Stock options exercised, including
related tax benefit of $1,035 150,630 16 2,610
Unrealized foreign currency
translation adjustment-net of taxes
of $209 (488) ($488)
Unrealized loss on marketable
securities - net of taxes of $35 (42) (42)
Net income for the year 30,705 30,705
---------- ------ ------- -------- ----- ---- -------
Balance at November 3, 2000 15,208,015 1,521 40,862 221,922 (550) (400) $30,175
=======
Stock options exercised, including
related 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 $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
========== ====== ======= ======== ====== ==== ======
</TABLE>
There were no shares of preferred stock issued or outstanding in any of the
reported periods.
See Notes to Consolidated Financial Statements.
-37-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
November November October
4, 2001 3, 2000 29, 1999
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO) OPERATING
ACTIVITIES
Net Income $ 5,844 $ 30,705 $ 28,959
Adjustments to reconcile net income to cash provided by (applied to)
operating activities
Discontinued operations 814 697 2,533
Depreciation and amortization 24,582 20,962 19,716
Equity in net loss of joint ventures 49 302 33
Gain on sale of joint venture (2,049)
Gain on sale of partnership interest (4,173)
Gain on securities-net (5,552)
Accounts receivable provisions 8,462 7,580 5,026
Loss on foreign currency translation 64 8 74
Loss (gain) on dispositions of property, plant and equipment 118 (168) 51
Deferred income tax expense 2,620 3,636 674
Other 100 246 248
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 61,878 (93,086) (78,382)
Decrease (increase) in inventories 28,399 (13,814) (22,312)
Decrease (increase in prepaid expenses and other current
assets 3,229 (8,979) (1,438)
Decrease (increase) in other assets 2,153 (822) 773
(Decrease) increase in accounts payable (29,603) 22,092 29,801
Increase in accrued expenses 449 6,214 15,326
(Decrease) increase in customer advances and other liabilities (3,520) 4,276 8
(Decrease) increase in income taxes payable (6,655) (2,002) 3,087
-------- -------- --------
NET CASH PROVIDED BY (APPLIED TO) OPERATING
ACTIVITIES 89,258 (22,153) 2,128
-------- -------- --------
CASH (APPLIED TO) PROVIDED BY INVESTING
ACTIVITIES
Sales of investments 7,326 12,062 4,445
Purchases of investments (2,001) (13,177) (5,793)
Investment in joint ventures (2,793) (1,330)
Acquisitions (76) (1,779) (38,122)
Net proceeds from sale of partnership interest 4,017
Proceeds from disposals of property, plant and equipment 1,174 1,684 108
Purchases of property, plant and equipment (27,112) (37,024) (24,887)
Other (5) (160) (218)
-------- -------- --------
NET CASH APPLIED TO INVESTING ACTIVITIES (16,677) (41,187) (65,797)
-------- -------- --------
</TABLE>
-38-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--Continued
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
November November October
4, 2001 3, 2000 29, 1999
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
CASH PROVIDED BY (APPLIED TO) FINANCING ACTIVITIES
Proceeds from long-term debt 15,100
Payment of long-term debt (13,674) (12,653) (1,399)
Exercises of stock options 141 2,626 161
(Decrease) increase in notes payable-bank (77,568) 76,436 64,313
-------- -------- --------
NET CASH (APPLIED TO) PROVIDED BY FINANCING ACTIVITIES (76,001) 66,409 63,075
-------- -------- --------
Effect of exchange rate changes on cash (304) 148 (179)
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUING
OPERATIONS (3,724) 3,217 (773)
Net decrease (increase) in cash and cash equivalents from
discontinued operations (11,901) (1,520) 1,550
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,625) 1,697 777
Cash and cash equivalents, beginning of year 34,099 32,402 31,625
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 18,474 $ 34,099 $ 32,402
======== ======== ========
SUPPLEMENTAL INFORMATION
Cash paid during the year:
Interest expense, including $668 capitalized in 2000 and $256
capitalized in 1999 $ 12,624 $ 10,517 $ 8,364
Income taxes, net of refunds $ 8,012 $ 17,452 $ 14,145
Obligation incurred in connection with the purchase and support of
an Enterprise Resource Planning system $4,334
</TABLE>
See Notes to Consolidated Financial Statements.
-39-
<PAGE>
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, consisting of four
operating segments: Staffing Services; Telephone Directory; Telecommunications
Services and Computer Systems.
Fiscal Year: In 2001, the Company's fiscal year ended on Sunday, November 4,
2001 and thereafter ends on the Sunday nearest October 31. The 2001 and 1999
fiscal years were comprised of 52 weeks. The 2000 fiscal year was comprised of
53 weeks (one additional week in the fourth quarter).
Consolidation: The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany transactions have
been eliminated upon consolidation. The minority interest on the November 3,
2000 balance sheet primarily represents the 41% interest in Autologic
Information International, Inc. ("Autologic") not owned by the Company (see Note
I).
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles 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 accounts for its stock-based compensation
arrangements under the provisions of APB Opinion 25, "Accounting for Stock
Issued to Employees" (see Note J).
Revenue Recognition: Sales are recorded when products are shipped and when
services are rendered. Revenues and costs applicable to long-term contracts,
including those providing for software customization or modification, are
recognized on the percentage-of-completion method, measured by work performed,
or the completed-contract method, as appropriate. Provisions for estimated
losses on contracts are recorded when losses become evident. 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 paid to the Company, is excluded from sales.
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: Manufacturing inventories are priced at the lower of cost, on a
first-in, first-out basis, or market. Accumulated unbilled costs on contracts
related to performing services are carried at the lower of actual cost or
realizable value (see Note C).
-40-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Long-Lived Assets: The Company reviews for the impairment of long-lived assets
and certain identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. No such
impairment indicators have been identified by the Company. An impairment loss
would be recognized when estimated future cash flows expected to result from the
use of the asset and its eventual disposition are less than its carrying amount.
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets," which was adopted by the
Company in fiscal 2001. This standard supersedes SFAS No. 121 and the provisions
of Accounting Principals Board (APB) Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" with
regard to reporting the effects of a disposal of a segment of a business. SFAS
No. 144 establishes a single accounting model for assets to be disposed of by
sale and addresses several SFAS No. 121 implementation issues. SFAS No. 144 did
not have a material effect on the results of operations or financial position.
Property, Plant and Equipment: Depreciation and amortization are provided on the
straight-line and accelerated methods at rates calculated to write off the cost
of the assets over their estimated useful lives. Fully depreciated assets are
written off against their related allowance accounts. The assets are depreciated
over the following periods:
Buildings - 25 to 31-1/2 years
Machinery and equipment - 3 to 15 years
Leasehold improvements - length of lease or life of
asset, whichever is shorter
Enterprise Resource Planning system - 5 to 7 years
Property, plant and equipment consisted of:
November 4, November 3,
2001 2000
----------- -----------
(Dollars in thousands)
Land and buildings $ 35,466 $ 35,378
Machinery and equipment 93,527 91,218
Leasehold improvements 7,573 8,171
Enterprise Resource Planning system 31,098 25,548
-------- --------
167,664 160,315
Less allowances for depreciation and amortization 70,517 63,990
-------- --------
$ 97,147 $ 96,325
======== ========
A term loan is secured by a deed of trust on land and buildings with a carrying
amount at November 4, 2001 of $12.3 million (see Note E).
-41-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Intangible Assets: Intangible assets principally consist of the unamortized
balances of the excess of cost over the fair value of the net assets of
companies or businesses acquired. At November 4, 2001, intangible assets
consisted of goodwill of $39.9 million and other intangible assets of $0.4
million. In June 2001, the FASB issued SFAS No. 141, "Business Combinations"
("SFAS 141"), and No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
effective for fiscal years beginning after December 15, 2001. Under the new
rules, goodwill will no longer be amortized but will be subject to annual
impairment tests in accordance with SFAS 142. Other intangible assets will
continue to be amortized over their useful lives. The Company has elected to
apply the new rules on accounting for goodwill and other intangible assets
beginning in the first quarter of fiscal 2002. Application of the
non-amortization provisions of SFAS 142 is expected to result in an increase in
net income of approximately $2.3 million ($0.15 per share) in fiscal 2002.
During fiscal 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets as of
November 5, 2001. While the Company's revaluation under the new accounting rules
has not yet been completed, it is likely that there could be a material
write-down due to indications of impairment, reflecting declines in market value
of the acquisitions since they were purchased. The charge for the write-down, to
the extent required, will be reported as a Cumulative Effect of a Change in
Accounting in the first fiscal quarter of 2002.
Income Taxes: Income taxes are provided using the liability method (see Note F).
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.
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 of shares
which 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
H).
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: As of the beginning of fiscal 2001, the
Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS 133), which was issued in June 1998, and its amendments SFAS
No. 137, Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of FASB Statement No. 133, and Statement No. 138,
Accounting for Derivative Instruments and Certain Hedging Activities, issued in
June 1999 and June 2000, respectively (collectively referred to as "SFAS
-42-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
133"). The Company enters into derivative financial instrument contracts only
for hedging purposes. As a result of the Company's adoption of SFAS 133, the
Company recognizes all derivative financial instruments, such as interest rate
swap contracts and foreign currency options and exchange contracts 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 the results of
operations or in stockholders' equity as a component of other comprehensive
income, depending on whether the derivative financial instrument qualifies for
hedge accounting and, if so, whether it qualifies as a fair value hedge or cash
flow hedge. Generally, changes in fair values of the derivatives accounted for
as fair value hedges are recorded in the results of operations along with the
portions of the changes in the fair values of the hedged items that relate to
the hedged risks. Changes in fair values of derivatives accounted for as cash
flow hedges, to the extent they are effective as hedges, are recorded in other
comprehensive income, net of deferred taxes. Changes in fair values of
derivatives not qualifying as hedges are reported in the results of operations.
Since the Company's foreign currency options are purchased during, and generally
settled on the last weekday of, each fiscal quarter and interest rate swaps are
recorded at fair value, the adoption of SFAS 133 has had no material effect on
the Company's consolidated financial position or results of operations.
NOTE B--INVESTMENT IN SECURITIES
At November 4, 2001, short-term investments consisted of $3.8 million ($3.6
million at November 3, 2000) invested in mutual funds for the Company's deferred
compensation plan (see Note M). Non-current investments at that date consisted
of a portfolio of equity securities with a new cost basis of $40,000 ($750,000
at November 3, 2000) and a market value of approximately $24,000 ($86,000 at
November 3, 2000). The gross unrealized loss of $16,000 at November 4, 2001
($0.7 million at November 3, 2000) is 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 the 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.
-43-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE C--INVENTORIES
November 4, November 3,
Inventories consisted of: 2001 2000
----------- -----------
(Dollars in thousands)
Services:
Accumulated unbilled costs on
service contracts $ 36,186 $ 64,585
-------- --------
Products: (a)
Materials 7,583
Work-in-process 1,548
Service parts 928
Finished goods 1,085
-------- --------
-- 11,144
-------- --------
Total $ 36,186 $ 75,729
======== ========
(a) Represents the inventory of Autologic which has been classified as assets
held for sale in the November 4, 2001 balance sheet (see Note I).
The cumulative amounts billed, principally under service contracts at November
4, 2001 and long-term contracts at November 3, 2000, of $4.6 million and $9.3
million, respectively, are credited against the related costs in inventory.
NOTE D--SHORT-TERM BORROWINGS
At November 4, 2001, the Company had credit lines with domestic and foreign
banks which provide for unsecured borrowings and letters of credit up to an
aggregate of $139.9 million, including $127.5 million under a one year,
syndicated, unsecured revolving credit agreement. On September 11, 2001, the
Company entered into a new revolving credit agreement, which replaced its two
revolving credit agreements and provided for $127.5 million of unsecured
borrowing through September 9, 2002. On November 30, 2001, in accordance with
the terms of the agreement, the $127.5 million credit line was reduced to $115.5
million as a result of the sale of Autologic. Borrowings under the revolving
credit facility bear interest at various interest rates, with the Company
generally having the option to select the most favorable rate at the time of
borrowing. Since short-term interest rates have decreased, the Company's
effective interest rates have been reduced. The revolving credit facility
requires, among other things, the maintenance of various financial ratios and
covenants, including a fixed charge ratio and a requirement that the Company
maintain a consolidated net worth, as defined, of at least $230.0 million, plus
50% of consolidated net income for the fiscal year being measured, resulting in
a requirement at November 4, 2001 to maintain consolidated net worth of $232.9
million. The credit agreement also contains limitations on the extent to which
the Company and its subsidiaries may incur additional indebtedness, grant liens
and sell assets. At November 4, 2001, the Company had total outstanding bank
borrowings of $65.8 million ($144.1 million at November 3, 2000), of which $60.3
million was borrowed under the new revolving credit line. The weighted average
interest rate of short-term borrowings at each year-end was 7% in fiscal 2001
and 8% in fiscal 2000.
-44-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E--LONG-TERM DEBT AND FINANCING ARRANGEMENTS
Long-term debt consists of the following:
November 4, November 3,
2001 2000
----------- -----------
(Dollars in thousands)
7.92% Senior Notes (a) $ 30,000 $ 40,000
7.86% term loan (b) 15,125 2,400
Notes payable (c) & (d) 2,297 3,596
-------- --------
47,422 45,996
Less amounts due within one year 31,429 13,699
-------- --------
Total long-term debt $ 15,993 $ 32,297
======== ========
(a) On August 28, 1996, the Company issued $50.0 million of Senior Notes in a
private placement to institutional investors. The notes bear interest at
7.92% per annum, payable semi-annually on February 28 and August 28, and
provide for amortization of principal in five equal annual installments
which began in August 2000. In March 2000, the Company entered into a
series of interest rate swap agreements, which effectively converted these
notes, through their maturity, from fixed to floating rate debt. However
in December 2000, the Company terminated the swap agreements. The fair
value of the agreements at termination of $0.5 million was paid to the
Company and is reducing interest expense over the remaining term the notes
are outstanding. The notes were issued pursuant to Note Purchase
Agreements, which contain various affirmative and negative covenants. One
covenant requires the Company to maintain a level of consolidated net
worth which, under the formula in the agreements, was $157.1 million at
November 4, 2001. However, the terms of the Company's revolving credit
agreement required the Company to maintain net worth of $232.9 million at
November 4, 2001 (see Note D).
In January 2002, the Company received a commitment from a major bank to
enter into a three-year accounts receivable securitization program which,
assuming completion, will provide for the financing of up to $100 million
of certain accounts receivable.
Due to the seasonality of its business, compounded by current general
economic conditions, the Company currently expects to report an operating
loss in the first quarter of fiscal 2002. In order for the Company to be
in a position to implement the proposed receivable securitization program,
in lieu of seeking amendments to the covenants contained in the agreements
under which the 7.92% Senior Notes are issued to permit the securitization
and other amendments that may have become required, depending upon the
size of the first quarter loss, the Company determined to prepay the
remaining $30.0 million of its Senior Notes that otherwise would have been
due in equal annual installments over the next two and one-half years. The
Company has notified the noteholders that it will prepay all of the Senior
Notes on March 5, 2002. In connection with the prepayment of the Senior
Notes, the Company and the bank lenders under the Company's revolving
credit agreement, described in Note D, amended, effective February 1,
2002, various covenants in that agreement. The Company also agreed to
secure its obligations under the revolving credit agreement with certain
other accounts receivable (the level of which at November 4, 2001 was
approximately $70.0 million) unrelated to those to be used in the proposed
securitization no later than the date the Senior Notes are repaid. The
Company believes it will remain in compliance with the amended covenants
included in the revolving credit agreement throughout its remaining term.
The Company will pay a "make whole" premium on the prepayment of the
Senior Notes that is expected to approximate $2.0 million. As a result,
the Company will incur an extraordinary pre-tax charge in the amount of
the premium in the second quarter of fiscal 2002 for the extinguishment of
that debt. The Company has reflected the outstanding principal amount of
the Senior Notes as a current liability at November 4, 2001 in the
accompanying balance sheet.
-45-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE E--LONG-TERM DEBT AND FINANCING ARRANGEMENTS--Continued
(b) In September 2001, the Company repaid $1.7 million, the remaining balance
of a term loan, which was due in October 2001. Concurrently, a subsidiary
of the Company entered into a $15.1 million loan agreement with General
Electric Capital Business Asset Funding Corporation. The loan, which bears
interest at 8.2% per annum and requires principal and interest payments of
$0.4 million per quarter, is secured by a deed of trust on land and
buildings (carrying amount at November 4, 2001, $12.3 million). The
obligation is guaranteed by the Company.
(c) A loan of $2.5 million was made to a foreign subsidiary on January 18,
1996 to finance the acquisition of a printing press. The final semi-annual
payment of $0.2 million was made on March 15, 2001.
(d) 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, which has been capitalized and
is being amortized over a five to seven year period. The agreement
provides for interest, calculated at 6%, and principal payments in five
equal annual installments of $1.3 million, which began in February 1999,
with the final payment due in February 2003.
Principal payments in each of the next five years on long-term debt outstanding
at November 4, 2001 (which reflects the anticipated prepayment of the
outstanding Senior Notes in the second quarter of fiscal 2002) are:
Fiscal Year Amount
----------- ------
(Dollars in thousands)
2002 $31,429
2003 1,524
2004 371
2005 402
2006 437
Thereafter 13,259
-------
$47,422
=======
-46-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES
The components of the Company's income from continuing operations before income
taxes by location and the related income tax provision are as follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
The components of the income from
continuing operations before income
taxes, based on the location of
operations, consist of the following:
Domestic $ 10,421 $ 50,966 $45,304
Foreign 597 973 5,126
-------- -------- -------
$ 11,018 $ 51,939 $50,430
======== ======== =======
The components of the income tax
provision include:
Current:
Federal (a) $ 1,110 $ 12,952 $13,064
Foreign 117 877 2,049
State and local 513 3,072 3,151
-------- -------- -------
Total current 1,740 16,901 18,264
-------- -------- -------
Deferred:
Federal 2,366 2,950 317
Foreign (145) (107) 103
State and local 399 793 254
-------- -------- -------
Total deferred 2,620 3,636 674
-------- -------- -------
Total income tax provision $ 4,360 $ 20,537 $18,938
======== ======== =======
</TABLE>
Reduced in 2001, 2000 and 1999 by benefits of $1.0 million, $0.7 million and
$1.2 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:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of federal
tax benefit 5.1 4.8 4.5
Tax effect of foreign operations 2.1 (0.6) (1.9)
Goodwill amortization 2.6 1.6 1.9
General business credits (5.7) (0.9) (1.5)
Other-net 0.5 (0.4) (0.4)
-------- -------- -------
Effective tax rate 39.6% 39.5% 37.6%
======== ======== =======
</TABLE>
-47-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes and also include operating
loss and tax credit carryforwards. Significant components of the Company's
deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
November 4, November 3,
2001 2000
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts $ 3,540 $ 3,491
Inventory valuation 544 3,648
Domestic net operating loss carryforwards 2,847
Foreign tax credit carryforwards 602 724
Compensation accruals and deferrals 3,933 4,518
Warranty accruals 99 426
Foreign asset bases 283 1,347
Accelerated book depreciation 1,001
Other-net 980 1,181
-------- --------
Total deferred tax assets 9,981 19,183
Less valuation allowance for deferred tax assets 602 548
-------- --------
Deferred tax assets, net of valuation allowance 9,379 18,635
-------- --------
Deferred Tax Liabilities:
Software development costs 8,887 9,736
Earnings not currently taxable 3 4
Accounts receivable valuation 827
Accelerated book depreciation 2,990
-------- --------
Total deferred tax liabilities 11,880 10,567
-------- --------
Net deferred tax (liabilities) assets ($ 2,501) $ 8,068
======== ========
Balance sheet classification:
Current assets $ 8,585 $ 12,563
Non-current liabilities 11,086 4,495
-------- --------
Net deferred tax (liabilities) assets ($ 2,501) $ 8,068
======== ========
</TABLE>
The net deferred tax assets of Autologic have been classified as assets held for
sale in the November 4, 2001 balance sheet (see Note I).
-48-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE F--INCOME TAXES--Continued
As of November 4, 2001, for tax purposes, the Company had foreign tax credit
carryforwards of $0.6 million, which expire through 2007. For financial
statement purposes, a valuation allowance of $0.6 million has been recognized to
reduce the deferred tax asset related to these carryforwards.
The valuation allowance increase during 2001 of $54,000 was due to the
additional value allowance related to foreign tax credit carryforwards partially
offset by the reclassification of Autologic (see Note I).
Substantially all of the undistributed earnings of foreign subsidiaries of $7.8
million, including $2.1 million from Autologic, at November 4, 2001 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 which 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.
NOTE G--JOINT VENTURES
The Company owns a 50% interest in westVista Advertising Services, a joint
venture with a subsidiary of TELUS Corporation. The venture was formed in fiscal
1998 for the acquisition or establishment and subsequent operation of one or
more businesses engaged in the publication of telephone directories in the
western United States. During fiscal 1999, the venture made its first
acquisition, purchasing eleven community Yellow Pages directories. In fiscal
2000, the venture acquired seven additional community Yellow Pages directories.
Additional acquisitions by the joint venture have been suspended. In fiscal
2001, sales of the venture were $6.0 million and the Company's share of the loss
sustained was $49,000.
In the first quarter of fiscal 1997, the Company sold its 50% interest in
Telelistas Editora Ltda. ("Telelistas"), a Brazilian joint venture, that is the
official publisher of telephone directories in Rio de Janeiro for the
government-owned telephone company, and received $2.5 million in excess of its
carrying value at the date of sale. In connection with the sale, the Company
continued to grant credit to Telelistas and guarantee the venture's obligations
with respect to certain import financing, principally for the printing of
telephone directories by the Company's Uruguayan division. Therefore, the
Company had deferred the gain on the sale. In fiscal 1998, Telelistas repaid
certain of these obligations and the Company's guarantees were released.
Accordingly, $500,000 of the gain on the sale was recognized in fiscal 1998.
During fiscal 1999, the venture repaid substantially all of its remaining
obligations. Accordingly, the $2.0 million balance of the deferred gain was
recognized in fiscal 1999.
-49-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE H--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.
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Denominator for basic earnings per share -
Weighted average number of shares 15,212,076 15,139,483 15,023,046
Effect of dilutive securities:
Employee stock options 32,274 176,474 129,566
---------- ---------- ----------
Denominator for diluted earnings per share -
Adjusted weighted average number of shares 15,244,350 15,315,957 15,152,612
========== ========== ==========
</TABLE>
Options to purchase 573,241, 50,750, and 115,460 shares of the Company's common
stock were outstanding at November 4, 2001, November 3, 2000 and October 29,
1999, respectively, but were not included in the computation of diluted earnings
per share because their exercise prices were greater than the average market
price of the Company's common shares.
NOTE I--SALE AND ACQUISITION OF SUBSIDIARIES AND BUSINESSES
In April 2001, the Company sold its interest in a real estate partnership,
resulting in a pre-tax gain of $4.2 million.
On September 25, 2001, the Company's 59% owned publicly-held subsidiary,
Autologic Information International, Inc. ("Autologic"), entered into an
agreement for Agfa Corporation, a subsidiary of Agfa-Gevaert N.V., to acquire
all of Autologic's outstanding shares through a tender offer and subsequent
merger. The tender offer was completed on November 30, 2001, at which time the
Company received $24.2 million for its shares. The proceeds received by the
Company and the Company's gain on the transaction, presently estimated to be
approximately $2.0 million, will be reflected in the Company's first quarter of
fiscal 2002. Accordingly, the results of operations of Autologic, the Company's
Electronic Publication and Typesetting segment, have been classified as
discontinued in the statements of income and cashflows for all the prior periods
and its assets and liabilities included as separate line items on the Company's
fiscal 2001 balance sheet.
-50-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--SALE AND ACQUISITION OF SUBSIDIARIES AND BUSINESSES--Continued
Included in discontinued operations for the three fiscal years ended November 4,
2001 are:
<TABLE>
<CAPTION>
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Revenue $ 68,518 $ 80,915 $72,461
======== ======== =======
Loss before taxes and minority interest ($1,412) ($1,062) ($5,775)
Income taxes (benefit) 110 (550) 1,048
Minority interest 488 915 2,194
-------- -------- -------
Discontinued operations ($814) ($697) ($2,533)
======== ======== =======
</TABLE>
Autologic's assets and liabilities reclassified in the November 4, 2001 balance
sheet include:
November 4,
2001
-----------
(Dollars in thousands)
Cash $14,879
Accounts receivable 10,807
Inventory 7,782
Deferred taxes and other current assets 5,717
Property, plant and equipment, net 4,401
Deferred taxes and other non-current assets 4,049
-------
Assets held for sale $47,635
=======
Accounts payable $ 2,358
Accrued expenses 4,333
Customer advances and other liabilities 4,037
Minority interest 15,585
-------
Liabilities related to assets held for sale $26,313
=======
The November 3, 2000 balance sheet includes current assets of $43.0 million,
non-current assets of $8.1 million, current liabilities of $13.7 million and
minority interest of $16.1 million, related to Autologic.
In December 1999, the Company completed its purchase of the Wired Services and
Professional Staffing divisions of two Lucent Technologies subsidiaries. The
Wired Services division installs cable, wire and small telecommunications
systems for businesses, and the Professional Staffing division provides
technical, management and administrative personnel for temporary assignments.
The Company paid cash for inventory and equipment, with limited additional
consideration due based on future sales of the Wired Services division. The
amounts paid
-51-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE I--SALE AND ACQUISITION OF SUBSIDIARIES AND BUSINESSES--Continued
and payable are not considered material to the Company. This
acquisition, along with Belgium operations acquired by Volt Europe, resulted in
an increase in intangible assets of $0.7 million.
NOTE J--STOCK OPTION PLANS
The Non-Qualified Stock Option Plan adopted by the Company in fiscal 1980
terminated on June 30, 1990, except for options previously granted under the
plan. All remaining outstanding options under this plan were exercised during
fiscal 2000.
In May 1995, the Company adopted a new Non-Qualified Stock Option Plan, which
enables 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 4, 2001, options
to purchase 418,399 (349,847 at November 3, 2000) shares were vested and 361,402
(361,443 at November 3, 2000) shares were available for future grants under the
plan.
Transactions involving outstanding stock options under these plans were:
<TABLE>
<CAPTION>
1980 Plan 1995 Plan
------------------------------- -------------------------------
Number of Weighted Average Number of Weighted Average
Shares Exercise Price Shares Exercise Price
---------- ---------------- --------- -----------------
<S> <C> <C> <C> <C>
Outstanding-October 30, 1998 81,000 $ 4.00 537,743 $ 20.96
Granted 119,950 20.32
Exercised (8,110) 18.08
Forfeited (24,575) 23.59
------- -------
Outstanding-October 29, 1999 81,000 4.00 625,008 20.77
Granted 59,650 23.51
Exercised (81,000) 4.00 (69,630) 18.19
Forfeited (33,678) 25.53
------- -------
--
=======
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
=======
</TABLE>
-52-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE J--STOCK OPTION PLANS--Continued
Price ranges of outstanding and exercisable options as of November 4, 2001 are
summarized below:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Option
----------------------------------------------- ------------------------------
Average
Range of Number of Remaining Weighted Average Number of Weighted Average
Exercise Prices Shares Life (Years) Exercise Price Shares Exercise Price
- --------------- ------ ------------ -------------- ------ --------------
<S> <C> <C> <C> <C> <C>
$12.42 - $17.50 38,750 8 $16.69 12,600 $16.72
$18.08 - $18.08 280,563 4 $18.08 280,563 $18.08
$18.32 - $23.06 144,728 8 $21.09 42,316 $21.39
$23.59 - $59.81 109,700 6 $30.27 82,920 $29.80
</TABLE>
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
method provided for in SFAS No. 123, "Accounting and Disclosure for Stock Based
Compensation," pro forma net income and earnings per share would have been:
<TABLE>
<CAPTION>
2001 2000 1999
------ ------ ------
<S> <C> <C> <C>
Pro forma net income (in thousands) $5,343 $30,089 $28,141
Pro forma net income per share-basic $ 0.35 $ 1.99 $ 1.87
Pro forma net income per share-diluted $ 0.35 $ 1.96 $ 1.87
</TABLE>
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 2001, 2000 and 1999, respectively:
risk-free interest rates of 5.0%, 5.9% and 6.0%, respectively; expected
volatility of .65, .61 and .70, respectively; an expected life of the options of
five years; and no dividends. The weighted average fair value of stock options
granted during fiscal 2001, 2000 and 1999 were $13.00, $16.29 and $13.53,
respectively.
NOTE K--SEGMENT DISCLOSURES
Financial data concerning the Company's sales, segment profit (loss) and
identifiable assets by reportable operating segment for fiscal years 2001, 2000
and 1999 are presented in tables under Item 1 of this Report on Form 10-K and
are incorporated herein by reference.
Total sales include both sales to unaffiliated customers, as reported in the
Company's consolidated statements of income, 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 income, interest expense,
foreign exchange gains and losses, income taxes, equity income and minority
interests.
-53-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K-SEGMENT DISCLOSURES--Continued
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 ("IT") 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, outside plant construction, system installation,
maintenance, removals and distribution of telecommunications products to the
outside plant and central office of telecommunications and cable companies, and
within their customers' premises, as well as for large businesses and
governmental entities requiring telecommunications services.
Computer Systems - This segment provides directory assistance outsourcing
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
for the telecommunications industry; and provides IT services to the Company's
other businesses and third parties.
-54-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE K--SEGMENT DISCLOSURES--Continued
Sales to external customers and assets of the Company by geographic area are as
follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Sales:
Domestic $1,798,817 $2,014,841 $1,934,769
International 133,444 105,424 133,915
---------- ---------- ----------
$1,932,261 $2,120,265 $2,068,684
========== ========== ==========
Assets:
Domestic $ 556,535 $ 640,202 $ 532,820
International 80,701 104,626 85,509
---------- ---------- ----------
$ 637,236 $ 744,828 $ 618,329
========== ========== ==========
</TABLE>
Sales for all periods excludes sales by Autologic which was reclassified as a
discontinued operation. The assets of Autologic have been classified as assets
held for sale in the November 4, 2001 balance sheet (see Note I).
Capital expenditures and depreciation and amortization by the Company's
operating segments are as follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------
November 4, November 3, October 29,
2001 2000 1999
----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Capital Expenditures:
Staffing Services $ 12,062 $ 7,167 $ 4,596
Telephone Directory 2,891 1,864 2,681
Telecommunications Services 3,491 6,511 6,434
Computer Systems 3,520 3,300 1,999
-------- -------- -------
Total segments 21,964 18,842 15,710
Corporate 5,148 18,468 10,870
-------- -------- -------
$ 27,112 $ 37,310 $26,580
======== ======== =======
Depreciation and Amortization (a):
Staffing Services $ 8,275 $ 7,942 $ 6,555
Telephone Directory 3,665 3,560 4,571
Telecommunications Services 4,716 4,319 3,772
Computer Systems 2,979 3,164 4,011
-------- -------- -------
Total segments 19,635 18,985 18,909
Corporate 4,947 1,976 808
-------- -------- -------
$ 24,582 $ 20,961 $19,717
======== ======== =======
</TABLE>
(a) Includes depreciation and amortization of property, plant and equipment
for fiscal years 2001, 2000 and 1999 of $20.5 million, $16.7 million and
$15.7 million, respectively.
-55-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for the
fiscal years ended November 4, 2001 and November 3, 2000. The results of fiscal
2001 and fiscal 2000 have been reclassified to reflect Autologic as a
discontinued operation due to its sale after year-end (see Note I). Each quarter
contained thirteen weeks, except for the fourth quarter of fiscal 2000, which
contained fourteen weeks.
<TABLE>
<CAPTION>
Fiscal 2001 Quarter
-----------------------------------------------------
First(a) Second(b) Third(c) Fourth(c)
-------- --------- -------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $509,178 $518,383 $459,003 $445,697
======== ======== ======== ========
Gross profit $22,079 $34,125 $26,357 $40,136
======== ======== ======== ========
Income form continuing operations ($1,799) $3,341 ($959) $6,075
Discontinued operations (85) (413) (283) (33)
-------- -------- -------- --------
Net (loss) income ($1,884) $2,928 ($1,242) $6,042
======== ======== ======== ========
Basic earnings per share:
(Loss) Income from continuing operations per share ($0.12) $0.22 ($0.06) $0.40
Discontinued operations per share (0.03) (0.02)
-------- -------- -------- --------
Net (loss) income per share ($0.12) $0.19 ($0.08) $0.40
======== ======== ======== ========
Diluted earnings per share:
(Loss) Income from continuing operations per share ($0.12) $0.22 ($0.06) $0.40
Discontinued operations per share (0.03) (0.02)
-------- -------- -------- --------
Net (loss) income per share ($0.12) $0.19 ($0.08) $0.40
======== ======== ======== ========
<CAPTION>
Fiscal 2000 Quarter
-----------------------------------------------------
First Second Third Fourth
-------- --------- -------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $482,512 $517,914 $515,976 $603,863
======== ======== ======== ========
Gross profit $26,717 $39,408 $42,135 $49,267
======= ======= ======= =======
Income from continuing operations $3,832 $7,853 $9,978 $9,739
Discontinued operations (214) (131) (148) (204)
------ ------ ------ ------
Net income $3,618 $7,722 $9,830 $9,535
====== ====== ====== ======
Basic earnings per share:
Income from continuing operations per share $0.25 $0.52 $0.66 $0.64
Discontinued operations per share (0.01) (0.01) (0.01) (0.01)
----- ----- ----- -----
Net income per share $0.24 $0.51 $0.65 $0.63
===== ===== ===== =====
Diluted earnings per share:
Income from continuing operations per share $0.25 $0.51 $0.65 $0.63
Discontinued operations per share (0.01) (0.01) (0.01) (0.01)
----- ----- ----- -----
Net income per share $0.24 $0.50 $0.64 $0.62
===== ===== ===== =====
</TABLE>
(a) Results for the first quarter of 2001 include the write down of an
investment in marketable securities resulting in a charge to earnings of
$0.7 million ($0.4 million, net of taxes, or $0.03 per share).
-56-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE L--QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)--Continued
(b) Results for the second quarter of 2001 include a gain of $4.2 million
($2.5 million, net of taxes, or $0.16 per share) from the sale of the
Company's interest in a real estate partnership.
(c) Results of the third and fourth quarters of 2001 include gains on the sale
of securities of $1.8 million ($1.1 million, net of taxes, or $0.07 per
share) and $4.5 million ($2.7 million, net of taxes, or $0.18 per share),
respectively.
Historically, the Company's results of operations have been lower in the first
fiscal quarter as a result of reduced requirements for its technical and
temporary personnel during the holiday season and its directory publishing
schedule. The Company's Uruguayan 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, and the revenues and profits of that segment's
DataNational division are lower in the Company's first fiscal quarter due to the
seasonality of its directory publishing schedule.
NOTE M--EMPLOYEE BENEFITS
The Company has various savings plans that permit eligible employees to make
contributions on a pretax salary reduction basis in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. In January 2000, the
Company amended the savings plan for in-house 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 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 $1.2 million and $0.9 million in fiscal 2001 and
fiscal 2000, respectively, were accrued and charged to compensation expense.
In January 2000, the Company made a final discretionary contribution to its
non-contributory Employee Stock Ownership Plan (ESOP), merged the ESOP with its
savings plan for in-house employees and fully vested all ESOP accounts within
the savings plan regardless of years of service. Contributions of $0.6 million
in fiscal 1999 were accrued and charged to compensation expense. Contributions
of previously unissued shares were made to the ESOP plan and are included in the
calculation of earnings per share.
The Company has a non-qualified deferred compensation and supplemental savings
plan which permits eligible employees to defer a portion of their income. This
plan consists solely of participant deferrals and earnings thereon, which are
reflected as a current liability under accrued wages and commissions.
NOTE N--FINANCIAL INSTRUMENTS
Financial instruments that potentially subject the Company to concentrations of
credit risk are primarily cash investments and accounts receivable. At November
4, 2001, the Company's cash investments were primarily in investment grade,
short-term instruments. Concentrations of credit risk with respect to the
Company's receivables are limited due to the large number of customers in the
Company's customer base and their dispersion across different industries and
geographic areas.
The Company purchases foreign currency option contracts, generally having a
maturity of three months, to hedge the adverse impact on its foreign currency
receivables and sales when the dollar strengthens against the related foreign
currencies. Foreign exchange (gain) loss in the accompanying statements of
income include any gain on option contracts, which are recognized in income in
the same period as losses on the hedged receivables and
-57-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
NOTE N--FINANCIAL INSTRUMENTS-Continued
reduced dollar amount of sales, and the premium cost of the option contracts,
which is amortized over the contract period.
At November 4, 2001, the Company had purchased an option, at a cost of $11,350,
which expires in the first quarter of fiscal 2002, to exchange euros for U.S.
dollars, in the aggregate notional amount of $0.5 million. There was no
unrealized gain or loss on this contract at that date. The counterparty to the
currency option contract is a major bank. Credit loss from counterparty
nonperformance is not anticipated.
In March 2000, the Company entered into a series of interest rate swap
agreements, which effectively converted, through their maturity, the Company's
then outstanding $40.0 million 7.92% Senior Notes from fixed to floating rate
debt. In December 2000, the Company terminated the swap agreements. The fair
value of the agreements at termination of $0.5 million was paid to the Company
and is reducing interest expense over the remaining term of the Senior Notes.
The carrying amount of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and notes payable to banks
approximated their fair values as of November 4, 2001 and November 3, 2000 due
to the relatively short maturity of these instruments. The carrying value of
long-term debt, including the current portion, approximated their fair values as
of November 4, 2001 and November 3, 2000 based upon quoted market prices for the
same or similar debt issues.
NOTE O--COMMITMENTS
The future minimum rental commitments as of November 4, 2001 for all
noncancellable operating leases are as follows:
Fiscal Year Total Office Space Equipment
----------- ----- ------------ ---------
(Dollars in thousands)
2002 $18,376 $17,589 $787
2003 14,206 13,419 787
2004 10,967 10,261 706
2005 7,212 7,212
2006 5,309 5,309
Thereafter 4,046 4,046
------- ------- ------
$60,116 $57,836 $2,280
======= ======= ======
Rental expense for all operating leases for fiscal years 2001, 2000 and 1999 was
$24.3 million, $20.1 million and $17.8 million, respectively. Many of the leases
also require the Company to pay or contribute to property taxes, insurance and
ordinary repairs and maintenance.
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 anticipated to be approximately $16 million, of which $5.1 million has been
incurred to date. The Company has no other material capital commitments.
-58-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information called for by Part III (Items 10, 11, 12 and 13) of Form 10-K
(except information as to the Company's executive officers, which information
follows Item 4 in this Report) will be included in the Company's Proxy Statement
for the Company's 2002 Annual Meeting of Shareholders, which the Company intends
to file within 120 days after the close of its fiscal year ended November 4,
2001 and is hereby incorporated by reference to such Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)(1). Financial Statements
The following consolidated financial statements of Volt Information
Sciences, Inc. and subsidiaries are included in Item 8 of this
Report:
<TABLE>
Page
----
<S> <C> <C>
Consolidated Balance Sheets--November 4, 2001 and November 3, 2000 35
Consolidated Statements of Income--Years ended November 4, 2001,
November 3, 2000 and October 29, 1999 36
Consolidated Statements of Stockholders' Equity--Years ended
November 4, 2001, November 3, 2000 and October 29, 1999 37
Consolidated Statements of Cash Flows--Years ended November 4,
2001, November 3, 2000 and October 29, 1999 38
Notes to Consolidated Financial Statements 40
14(a)(2). Financial Statement Schedules
The following consolidated financial statement schedule of Volt
Information Sciences, Inc. and subsidiaries is included in response
to Item 14(d):
Schedule II--Valuation and qualifying accounts S-1
</TABLE>
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.
-59-
<PAGE>
14(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 as of September 11, 2001 among the Company,
Gatton Volt Consulting Group Limited, The Chase Manhattan Bank, as
administrative agent, and Fleet National Bank, as syndication agent.
(Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 5, 2001, File No. 1-9232).
4.1(b)* First Amendment dated as of February 1, 2002 to the Credit Agreement
dated September 11, 2001 among the Company, Gatton Volt Consulting
Group Limited, The Chase Manhattan Bank, as administrative agent,
and Fleet National Bank, as syndication agent.
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).
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
- ------------------------------------------
+ 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.
-60-
<PAGE>
14 (b). Reports on Form 8-K
The only Report on Form 8-K filed by the Company during the fourth quarter of
the year ended November 4, 2001 was a Report dated September 25, 2001 (date
earliest event reported) reporting Item 5: Other Events and Item 7: Financial
Statements, Pro Forma Financial Information and Exhibits. No financial
statements were filed with that Report.
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.
-61-
<PAGE>
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
February 4, 2002 ---------------------------------
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.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/William Shaw Chairman of the Board, February 4, 2002
- ----------------------------- President and Chief Executive
William Shaw Officer and Director
/s/James J. Groberg Senior Vice President (Principal February 4, 2002
- ----------------------------- Financial Officer) and Director
James J. Groberg
/s/Jack Egan Vice President, Corporate Accounting February 4, 2002
- ----------------------------- (Principal Accounting Officer)
Jack Egan
/s/Jerome Shaw Director February 4, 2002
- -----------------------------
Jerome Shaw
/s/Steven A. Shaw Director February 4, 2002
- -----------------------------
Steven A. Shaw
/s/Lloyd Frank Director February 4, 2002
- -----------------------------
Lloyd Frank
Director
- -----------------------------
Irwin B. Robins
Director
- -----------------------------
Mark N. Kaplan
Director
- -----------------------------
Bruce G. Goodman
Director
- -----------------------------
William H. Turner
</TABLE>
-62-
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
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
---------- ----------- ----------- -------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Year ended November 4, 2001
Deducted from asset accounts:
Allowance for uncollectable accounts $8,952 $8,462 $8,038 (a,b,c) $9,376
Allowance for deferred tax assets 548 $396 (d) 342 (c) 602
Unrealized loss (gain) on marketable securities 664 62 (e) 710 (f) 16
Year ended November 3, 2000
Deducted from asset accounts:
Allowance for uncollectable accounts $7,941 $7,624 $6,613 (a,b) $8,952
Allowance for deferred tax assets 284 $342 (d) 78 (g) 548
Unrealized loss on marketable securities 587 77 (e) 664
Year ended October 29, 1999
Deducted from asset accounts:
Allowance for uncollectable accounts $5,822 $5,548 $61 (h) $3,490 (a,b) $7,941
Allowance for deferred tax assets 606 322 (g) 284
Unrealized loss (gain) on marketable securities (739) 1,326 (f) 587
</TABLE>
(a)--Includes write-off of uncollectable accounts.
(b)--Includes a foreign currency translation losses of $16 in 2001, $88 in 2000,
and $11 in 1999.
(c)--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.
(d)--Charge to income tax provision.
(e)--Charge (credit) to stockholders' equity.
(f)--Reclassification adjustment for write down of marketable securities
included in net income.
(g)--Principally write-off of unutilized foreign tax credits.
(h)--Pertains to the opening balance of a company acquired during fiscal 1999.
S-1
<PAGE>
INDEX TO 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 as of September 11, 2001 among the Company,
Gatton Volt Consulting Group Limited, The Chase Manhattan Bank, as
administrative agent, and Fleet National Bank, as syndication agent.
(Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 5, 2001, File No. 1-9232).
4.1(b)* First Amendment dated as of February 1, 2002 to the Credit Agreement
dated September 11, 2001 among the Company, Gatton Volt Consulting
Group Limited, The Chase Manhattan Bank, as administrative agent,
and Fleet National Bank, as syndication agent.
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).
21.* Subsidiaries of the Registrant.
23.* Consent of Ernst & Young LLP.
- -----------------------------------------------------
+ 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.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1(B)
<SEQUENCE>3
<FILENAME>ex4-1b.txt
<DESCRIPTION>FIRST AMENDMENT
<TEXT>
FIRST AMENDMENT
FIRST AMENDMENT dated as of February 1, 2002 (this "Amendment") to
the Credit Agreement dated as of September 11, 2001 (the "Credit
Agreement") among Volt Information Sciences, Inc., Gatton Volt
Consulting Group Limited, the Guarantors party thereto, the Lenders
party thereto, JP Morgan Chase Bank (formerly known as The Chase
Manhattan Bank), as Administrative Agent, and Fleet National Bank, as
Syndication Agent. Unless the context requires otherwise, capitalized
terms used herein without definition shall have the meanings ascribed to
them in the Credit Agreement.
R E C I T A L S
The parties hereto wish to amend the Credit Agreement in order to,
among other things, (i) anticipate the impending repayment in full of the Senior
Notes, (ii) modify or replace certain financial covenants in contemplation of
such impending repayment, or for other purposes, (iii) provide for certain
additional Subsidiaries to become Guarantors, and (iv) provide for the granting
of Liens on certain assets by certain of the Guarantors.
NOW, THEREFORE, in consideration of the mutual agreements contained
in the Credit Agreement and herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby mutually agree as follows:
I. AMENDMENTS
The Credit Agreement is hereby amended as follows:
1.1. The following definitions are hereby added to Section 1.01 of
the Credit Agreement in their respective proper alphabetical order:
"First Amendment to Credit Agreement" shall mean that certain
First Amendment, dated as of February 1, 2002, to the Credit
Agreement.
"Proposed Securitization" shall have the meaning assigned to
such term in Section 5.12.
"Senior Notes Payoff" shall mean the repayment in full
(including any applicable make-whole amount) by the Domestic
Borrower of the Senior Notes on or about March 5, 2002, in
accordance with those certain notices of prepayment, dated January
31, 2002 (the "Senior Notes Prepayment Notices"), given by the
Domestic Borrower to the holders of the Senior Notes in accordance
with the Senior Note Purchase Agreement, true and complete copies of
which notices have been given to the Administrative Agent.
EXHIBIT 4.1(b)
<PAGE>
"Senior Notes Prepayment Notices" shall have the meaning assigned to
such term within the defined term "Senior Notes Payoff".
1.2. The term "Material Indebtedness" as defined in Section 1.01 of
the Credit Agreement is hereby amended by the following additional sentence at
the end thereof:
"Notwithstanding the foregoing, Indebtedness under the Senior Notes,
the Noteholder Guaranties of Payment and the Senior Note Purchase
Agreement shall not constitute "Material Indebtedness" for purposes
of this Agreement or the other Credit Documents."
1.3. In Section 6.12 of the Credit Agreement, the phrase "other than
those Liens permitted by the provisions of clauses (a) through (c) of Section
6.02" is hereby restated to read in its entirety as "other than those Liens
permitted by the provisions of Section 6.02".
1.4. References in the Credit Agreement to: (i) Volt-Autologic
Directories S.A., Ltd., a Delaware corporation, shall be to Volt Directories
S.A., Ltd., a Delaware corporation formerly known as Volt-Autologic Directories
S.A., Ltd.; and (ii) Volt Human Resources, Inc., a Delaware corporation, shall
be to Volt Technical Resources, LLC, a Delaware limited liability Company
formerly known as Volt Human Resources, Inc.
II NEW SECTIONS
2.1. Section 3.03 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
SECTION 3.03. Governmental Approvals; No Conflicts.
The Transactions: (a) do not require any consent or approval
of, registration or filing with, or any other action by, any
Governmental Authority, except (i) such as have been obtained or
made and are in full force and effect, and (ii) such as may be
necessary to perfect any Lien granted under any Credit Document to
the Lenders or to the Administrative Agent on their behalf; (b) will
not violate any applicable law or regulation or the charter, by-laws
or other organizational documents of the Domestic Borrower or any of
its Subsidiaries (including Gatton and the Guarantors) or any order
of any Governmental Authority; (c) after giving effect to the Senior
Notes Payoff, will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Domestic
Borrower or any of its Subsidiaries (including Gatton and the
Guarantors) or its assets, or give rise to a right thereunder to
require any payment to be made by the Domestic Borrower or any of
its Subsidiaries (including Gatton and the Guarantors); and (d) will
not result in the creation or imposition of any Lien on any asset of
the Domestic Borrower or any of its Subsidiaries (including Gatton
and the Guarantors), except as permitted by Section 6.02.
2.2. The text set forth in Section 5.10 of the Credit Agreement is
hereby designated as subsection (a) thereof, and the following new subsection
(b) is hereby added at the end of such Section:
EXHIBIT 4.1(b)
<PAGE>
(b) At the times specified in Section 5.11 and in Section
5.12, the Domestic Borrower shall cause the respective applicable
collateral grantors referenced therein, to the extent not already
"Guarantors", to become "Guarantors" under the Guaranty of Payment,
jointly and severally with all the other Guarantors, by joining in
this Agreement and the Guaranty of Payment pursuant to documentation
reasonably satisfactory to the Administrative Agent.
2.3. The following new Sections 5.11 and 5.12 are hereby added to
the Credit Agreement:
SECTION 5.11. Collateralization.
Contemporaneously with the Senior Notes Payoff, or on such
earlier day as the Administrative Agent may require, the Domestic
Borrower shall cause each of the Subsidiaries set forth on Schedule
5.11, annexed to the First Amendment to Credit Agreement (which
Subsidiaries are the only domestic subsidiaries engaged in (A) its
telephone directory business segment, (B) the telecommunications
business group within its telecommunications business segment, or
(C) engaged in its computer systems segment), to grant to the
Administrative Agent, the Lenders and the Issuing Bank a security
interest in all of their respective domestic Accounts Receivable as
collateral security for their respective obligations under this
Agreement, the Guaranty of Payment and the other Credit Documents to
which they respectively may be party. Such collateral grant shall be
made pursuant to documentation reasonably satisfactory to the
Administrative Agent, which shall include a security agreement and
an amendment to this Agreement to, among other things, expand the
scope of the term "Credit Documents" and to include events of
default under such required security agreement as an Event of
Default. Such resulting security interest shall be of first priority
except as the Administrative Agent otherwise may permit (with regard
to the Senior Note Purchase Agreement, if then outstanding, or
otherwise). If any such collateral grantor is not a Guarantor as of
the time required for such collateral grant then, simultaneously
therewith, such collateral grantor shall become a party hereto and a
"Guarantor" under the Guaranty of Payment in accordance with Section
5.10(b). Notwithstanding Sections 6.02(g) and 6.03(b)(ii), sales or
transfers of Accounts Receivables constituting collateral in
accordance with this Section only may be made to: (x) a Subsidiary
that is (or thereby becomes) both a Guarantor and collateral
grantor; and (y) the Domestic Borrower, but only if the Domestic
Borrower is a collateral grantor with regard to such Accounts
Receivables. At the Administrative Agent's request made at any time
after the effective date of the First Amendment to Credit Agreement,
the Administrative Agent may cause to be performed a field exam of
the Domestic Borrower's and the Guarantors' Accounts Receivable, at
the sole cost and expense of the Domestic Borrower and the
Guarantors.
SECTION 5.12. Securitization.
The Domestic Borrower has advised the Administrative Agent and
the Lenders that the Domestic Borrower, together with its domestic
EXHIBIT 4.1(b)
<PAGE>
Subsidiaries engaged with it in their staffing solutions business
(except those acting in a paying agency capacity), are proposing to
engage in a securitization transaction of up to $100,000,000 with
regard to Accounts Receivables generated from such business (the
"Proposed Securitization"). The Proposed Securitization is not
permitted under this Agreement absent the consent of (at least,
depending upon the exact terms thereof) the Required Lenders, which
consent has not been granted as of February 1, 2002, nor is there
any obligation whatsoever on the part of any Lender to grant its
consent thereto. In the event that the Proposed Securitization has
not become effective on or prior to April 15, 2002, then, on such
date or as soon thereafter as is practicable but not later than
April 30, 2002, the Domestic Borrower shall, and shall cause each of
its domestic Subsidiaries engaged in such business (except those
acting in a paying agency capacity) to, grant to the Administrative
Agent, the Lenders and the Issuing Bank a security interest in all
of their respective domestic Accounts Receivable generated from such
business as collateral security for their respective obligations
under this Agreement, the Guaranty of Payment (other than in the
case of the Domestic Borrower) and the other Credit Documents to
which they respectively may be party. Such collateral grant shall be
made pursuant to documentation reasonably satisfactory to the
Administrative Agent, which shall include a security agreement and
an amendment to this Agreement to, among other things, expand the
scope of the term "Credit Documents" and to include events of
default under such required security agreement as an Event of
Default. Such resulting security interest shall be of first priority
except as the Administrative Agent otherwise may permit (with regard
to the Senior Note Purchase Agreement, if then outstanding, or
otherwise). If any such collateral grantor (other than the Domestic
Borrower) is not a Guarantor as of the time required for such
collateral grant then, simultaneously therewith, such collateral
grantor shall become a party hereto and a "Guarantor" under the
Guaranty of Payment in accordance with Section 5.10(b).
Notwithstanding Sections 6.02(g) and 6.03(b)(ii), sales or transfers
of Accounts Receivables constituting collateral in accordance with
this Section only may be made to: (x) a Subsidiary that is (or
thereby becomes) both a Guarantor and collateral grantor; and (y)
the Domestic Borrower, but only if the Domestic Borrower is a
collateral grantor with regard to such Accounts Receivables.
2.4. Section 6.01 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
SECTION 6.01. Indebtedness.
The Domestic Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
EXHIBIT 4.1(b)
<PAGE>
(a) Indebtedness created under this Agreement, the Guaranty of
Payment or any other Credit Document;
(b) prior to the Senior Notes Payoff, Indebtedness of (i) the
Domestic Borrower evidenced by the Senior Notes, and (ii) one or
more Subsidiaries under the Noteholder Guaranties of Payment, in
each case not exceeding $30,000,000 in aggregate principal amount at
any one time;
(c) advances from customers received in the ordinary course of
business;
(d) performance guaranties, trade guarantees, and bid
guarantees of the performance of contractual obligations of wholly
owned Subsidiaries of the Domestic Borrower; provided that such
guarantees and contractual obligations arise in the ordinary course
of business and that such contractual obligations are not for
borrowed money;
(e) other Indebtedness of the Domestic Borrower and its
Subsidiaries constituting Intercompany Debt, in any amount (subject
to compliance with Section 5.10);
(f) other Indebtedness, existing as of the date of the First
Amendment to Credit Agreement (and set forth on Schedule 6.01(f)
annexed thereto), of the Domestic Borrower and its Subsidiaries to
one or more other Persons (and including unused amounts under such
credit facilities), and any and all extensions, renewals and
replacements of any such Indebtedness provided that the aggregate
principal amount thereof (whether used or unused) is not increased;
(g) Guarantees by the Domestic Borrower of Indebtedness of its
Subsidiaries, except to the extent such Subsidiary Indebtedness
otherwise would be prohibited under this Agreement; and
(h) other Indebtedness of the Domestic Borrower, excluding
Debt for Borrowed Money.
2.5. Section 6.02 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
SECTION 6.02. Liens; Certain Asset Sales.
The Domestic Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including Accounts
Receivable) or rights in respect of any thereof, except:
(a) any Lien securing the Indebtedness permitted under clause
(a) of Section 6.01;
EXHIBIT 4.1(b)
<PAGE>
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Domestic Borrower
or any Subsidiary existing on the date of this Agreement and set
forth in Schedule 6.02; provided that (i) such Lien shall not
encumber or apply to any other property or asset of the Domestic
Borrower or any Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on said date;
(d) Liens securing Subsidiary Indebtedness permitted under
clause (f) of Section 6.01;
(e) Liens securing Indebtedness arising from a Thousand Oaks
Financing (to the extent permitted under Section 6.01), provided
that such Liens do not encumber or apply to any asset or property
other than the Thousand Oaks Building and the rents, fixtures and
other personal property associated therewith, which would ordinarily
be encumbered in a conventional mortgage financing;
(f) prior to the Senior Notes Payoff, equal and ratable Liens
granted to the holders of the Senior Notes to the extent required
under Senior Note Purchase Agreement by virtue of the Liens granted
in accordance with Section 5.11; and
(g) assignments or sales of Accounts Receivable permitted
under clause (ii) of Section 6.03(b).
2.6. Clause (ii) of subsection (b) of Section 6.03 is hereby deleted
in its entirety and replaced with the following:
"(ii) subject to the limitations set forth in Sections 5.11 and
5.12, and to any other limitations as may be set forth from time to
time in any security agreement included as a Credit Document, sales
or transfers of Accounts Receivable from the Domestic Borrower to a
Guarantor, from a Guarantor to the Domestic Borrower or from a
Guarantor to another Guarantor,"
2.7. Section 6.10 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
SECTION 6.10. Certain Financial Covenants
(a) The Domestic Borrower will not permit or suffer
Consolidated Net Worth at the end of any fiscal year to be less than
the sum of (i) $230,000,000 and (ii) 50% of Consolidated Net Income
for the fiscal year (if greater than zero for such year) of the
Domestic Borrower being measured.
EXHIBIT 4.1(b)
<PAGE>
(b) The Domestic Borrower will not permit or suffer the ratio,
as of the last day of any fiscal quarter of the Domestic Borrower,
of (i) EBITDA for the period of four consecutive fiscal quarters of
the Domestic Borrower ending on such date to (ii) tax expense
attributable to operating income and to interest income plus gross
interest expense, dividends and Current Portion of Long Term Debt
(excluding any part thereof attributable to the Senior Notes), to be
less than 1.5 to 1.0.
(c) The Domestic Borrower will not permit or suffer the ratio,
as of the last day of any fiscal quarter of the Domestic Borrower,
of (i) Debt for Borrowed Money to (ii) EBITDA (measured for the four
fiscal quarters then ended), to be greater than 3.0 to 1.0; except
that: (A) as of the last day of the fourth quarter of the 2001
fiscal year the level may exceed 3.0 to 1.0 but may not exceed 3.15
to 1.0; and (B) as of the last day of each of the second and third
quarters of the 2002 fiscal year the level may exceed 3.0 to 1.0 but
may not exceed 3.75 to 1.0
(d) The Domestic Borrower will not permit or suffer the ratio
of (i) the total amount of Eligible Accounts Receivable less the
amount of all reserves against uncollectibility (both general and
specific) taken by the Domestic Borrower reporting group to (ii) the
aggregate principal Indebtedness then outstanding under this
Agreement, the Senior Note Purchase Agreement and any other
obligation (but only if unsubordinated and unsecured) of any kind
(constituting Indebtedness), whether actual, contingent or otherwise
(including the amount of all undrawn letters of credit), of the
Domestic Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP, to be less than 2.0 to 1.0 as of the
end of any fiscal quarter of the Domestic Borrower.
2.8 In clause (d) of Article VII of the Credit Agreement, the word
"or" is deleted after "5.08" and replaced with a comma, and ", 5.11 and 5.12"
are inserted after "5.10" and before the comma.
2.9 In Article VII of the Credit Agreement, the word "or" at the end
of clause (m) thereof is hereby removed and instead inserted following the
semicolon at the end of clause (n) thereof, and the following new clause (o) is
hereby added after clause (n) of such Article:
(o) the Domestic Borrower shall fail to repay in full the
Indebtedness evidenced by the Senior Notes in accordance with the
Senior Notes Prepayment Notices or in advance thereof;
III. MISCELLANEOUS
3.1. Each Borrower and each Guarantor (subject, mutatis mutandis, to
Section 9.17 of the Credit Agreement) hereby represents and warrants that:
EXHIBIT 4.1(b)
<PAGE>
(a) its execution, delivery and performance of each of this
Amendment and any other agreement, instrument or document executed and delivered
in connection with this Amendment (i) is within its corporate powers, (ii) has
been duly authorized by all necessary corporate action, (iii) does not
contravene any law, rule or regulation applicable to it and (iv) does not
violate or create a breach or default under its organizational documents or,
after giving effect to the Senior Notes Payoff, any contractual provision
binding on it or affecting it or any of its property;
(b) this Amendment (and the Credit Agreement as amended hereby)
constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms, except as enforcement thereof may be subject to (i)
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar law affecting creditors' rights generally, and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law);
(c) after giving effect to this Amendment and the Senior Notes
Payoff, and to the transactions contemplated hereby: (i) there is no Default;
and (ii) all obligations of the Borrowers and the Guarantors under or in
connection with the Credit Agreement, as amended hereby, are payable in
accordance with the terms of the Credit Agreement as amended hereby, without any
defense, setoff or counterclaim of any kind; and
(d) the representations and warranties of each Borrower and each
Guarantor appearing in the Credit Documents were true and correct in all
material respects as of the date when made and, after giving effect to this
Amendment, the Senior Notes Payoff and the transactions contemplated hereby,
continue to be true and correct in all material respects on the date hereof,
except: (i) as to any such representation or warranty which by its terms applies
only as to a specified date; and (ii) in the case of any other representation or
warranty, to the extent of changes resulting from transactions or events not
prohibited by the Credit Documents.
3.2. The Domestic Borrower agrees to pay on demand all reasonable
costs and expenses of the Administrative Agent incurred by it in connection with
or arising out of the negotiation, preparation, review, execution and delivery
of this Amendment and the agreements and instruments referred to herein and the
transactions contemplated hereby (including the reasonable fees and expenses of
counsel to the Administrative Agent).
3.3. At any time and from time to time, upon the written request of
the Administrative Agent and at the sole cost and expense of the Domestic
Borrower, the Borrowers and the Guarantors will promptly execute, acknowledge
and/or deliver all such further instruments and agreements and take such further
actions as may be reasonably necessary or appropriate to more fully implement
the purposes of this Amendment, the Credit Agreement as amended hereby, and the
other Credit Documents.
3.4. The Credit Agreement, as amended hereby, and the other Credit
Documents are hereby ratified and confirmed and shall continue in full force and
effect.
EXHIBIT 4.1(b)
<PAGE>
All references in any Credit Document to the Credit Agreement shall be deemed to
be references to the Credit Agreement as amended by this Amendment, and as the
same may be further amended, supplemented or otherwise modified from time to
time.
3.5. This Amendment sets forth the entire agreement of the parties
with respect to the subject matter hereof.
3.6. Neither this Amendment nor any provision hereof may be waived,
amended or modified except pursuant to an agreement complying with Section
9.02(b) of the Credit Agreement.
3.7. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York without regard to conflicts of
laws principles of New York State law other than ss. 5-1401 of the New York
General Obligations Law.
3.8. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which taken together shall
constitute but one agreement. Delivery of an executed signature page of this
Amendment by telecopy shall be as effective as delivery of a manually executed
counterpart of this Amendment.
3.9. This Amendment shall become effective as of the date first
above written, provided that each of the following conditions shall have been
satisfied on or before February 4, 2002:
(a) the Administrative Agent shall have received counterparts of
this Amendment executed and delivered by each of the Borrowers, the Guarantors,
the Required Lenders and the Administrative Agent;
(b) all legal matters incident to this Amendment, the other
instruments and agreements relating hereto and the transactions contemplated
hereby shall be satisfactory to the Administrative Agent (who shall be entitled
to rely on the advise of its counsel in connection therewith);
(c) the Administrative Agent shall have received such other
documents and certificates as it may reasonably request, all in form and
substance satisfactory to the Administrative Agent in its reasonable discretion;
(d) counsel to the Administrative Agent shall have been paid $10,000
on account of its accrued and unpaid (and future, if applicable) legal fees and
disbursements; and
(e) each of the Lenders signing below, prior to noon on February 4,
2002 (as evidenced by a facsimile received by the Administrative Agent or its
counsel by such time on such date) shall have received payment of an amendment
fee equal to one-eighth of one percent of each such Lender's respective
Commitment.
EXHIBIT 4.1(b)
<PAGE>
The Administrative Agent shall notify the Borrowers, the Guarantors
and the Lenders if and when all of the foregoing conditions shall have been
satisfied, and such notice shall be conclusive and binding.
EXHIBIT 4.1(b)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
VOLT INFORMATION SCIENCES, INC. JP MORGAN CHASE BANK (f/k/a The
(a New York corporation) Chase Manhattan Bank), as a Lender and
as Administrative Agent
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
GATTON VOLT CONSULTING GROUP VOLT MANAGEMENT CORP.
LIMITED (a Delaware corporation)
(a United Kingdom corporation)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
FLEET NATIONAL BANK, VOLT DELTA RESOURCES, INC.
as a Lender (a Nevada corporation)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
BANK OF AMERICA, N.A., DATANATIONAL, INC.
as a Lender (a Delaware corporation)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
MELLON BANK, N.A., VOLT DIRECTORIES S.A., LTD.
as a Lender (a Delaware corporation f/k/a
Volt-Autologic Directories S.A.,
Ltd.)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
WELLS FARGO BANK, N.A., VOLT TECHNICAL RESOURCES, LLC.
as a Lender (a Delaware limited liability company
formerly known as Volt Human
Resources, Inc.)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
EXHIBIT 4.1(b)
<PAGE>
LLOYD TSB BANK PLC, VOLT INFORMATION SCIENCES
as a Lender FUNDING, INC.
(a Delaware corporation)
By:_____________________________ By:_____________________________________
Name: Name:
Title: Title:
By:_____________________________
Name:
Title:
EXHIBIT 4.1(b)
<PAGE>
Schedule 5.11
(i) Volt Telecommunications Group, Inc., a Delaware corporation, (ii) Volt Delta
Resources, Inc., a Nevada corporation, (iii) Volt Delta Resources, Inc., a
Delaware corporation, (iv) DataNational, Inc., a Delaware corporation, and (v)
DataNational, Inc., a Georgia corporation.
EXHIBIT 4.1(b)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>4
<FILENAME>ex-21.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT
The following is a list of the subsidiaries and joint ventures of Volt as of
January 11, 2002 (exclusive of certain subsidiaries which, if considered in the
aggregate, would not, as of November 4, 2001, constitute a significant
subsidiary within the meaning of Rule 1-02(v) of Regulation S-X). All of such
subsidiaries, to the extent they were active and owned by the Company during
fiscal 2001, are included as consolidated subsidiaries in the Registrant's
consolidated financial statements as of November 4, 2001.
Name (1) Jurisdiction of Incorporation
- -------- -----------------------------
Volt Delta Resources, Inc. Nevada
Volt Delta Resources, Inc. Delaware
Jefferson-Adams Corporation New Jersey
Volt Real Estate Corporation Delaware
VIS, Inc. Delaware
Volt Directories S.A., Ltd. Delaware
Volt Holding Corp. Nevada
Volt Realty Two, Inc. Nevada
500 South Douglas Realty Corp. Delaware
14011 So. Normandie Ave. Realty Corp. Nevada
Volt Orangeca Real Estate Corp. Delaware
Volt Australia, Ltd. Delaware
Shaw & Shaw, Inc. Delaware
Volt Technical Resources, LLC. Delaware
Volt ATRD Corp. Delaware
Sierra Technology Corporation California
Volt Opportunity Road Realty Corp. Delaware
Nuco II, Ltd. Delaware
Volt Management Corp. Delaware
Volt Technical Corp. Delaware
Fidelity National Credit Services Ltd. California
Nuco I, Ltd. Nevada
Volt Information Sciences Funding, Inc. Delaware
Volt Viewtech, Inc. Delaware
Volt Asia Enterprises, Ltd. Delaware
Volt STL Holdings, Inc. Delaware
DataNational of Georgia, Inc. Georgia
DataNational, Inc. Delaware
Volt Road Boring Corp. Florida
Volt Telecommunications Group, Inc. Delaware
Volt Publications, Inc. Delaware
Volt Maintech, LLC Delaware
Volt Gatton Holding, Inc. Delaware
Maintech, Incorporated Delaware
Volt SRS Limited Delaware
<PAGE>
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
EXHIBIT 21--SUBSIDIARIES OF THE REGISTRANT--Continued
Name (1) Jurisdiction of Incorporation
- -------- -----------------------------
ProcureStaff, Ltd. Delaware
VMC Consulting Corporation Delaware
Volt Delta B.V. Netherlands
Volt Delta Europe, Limited United Kingdom
Volt Resource Management Limited United Kingdom
Tainol, S.A. Uruguay
Volt Human Resources (VHRI), Inc. Canada
Volt Services Group (Netherlands) B.V. Netherlands
Volt Jantec, Inc. (2) Delaware
Volt System I, J.V., Inc. (3) California
Volt Directory Marketing, Ltd. (4) Delaware
Volt Europe Limited (formerly Gatton Volt
Computing Group Limited) United Kingdom
Gatton Volt Consulting Group Limited United Kingdom
Gatton Volt Computastaff Limited United Kingdom
Gatton Computer Services GmbH Germany
Gatton Computer Services BV Netherlands
Volt Europe (Belgium) SPRI Belgium
Volt Europe (Espana) SPA Spain
Volt Europe Temporary Services Limited United Kingdom
VMC Consulting Europe Limited United Kingdom
Volt Europe (France) SRL France
Volt Europe (Italia) SRL Italy
Volt Europe (Deutschland) GmbH Germany
Volt Netherlands Holding BV Netherlands
Volt Telecom BV Netherlands
Volt Europe (Nederland) BV Netherlands
westVista Advertising Services of Texas,
LLC (5) Texas
westVista Advertising Services, LLC (5) Delaware
- ------------------------------------------------------------------
(1) Except as noted, each named subsidiary is wholly owned, directly or
indirectly, by Volt Information Sciences, Inc., except that, in the case
of certain foreign subsidiaries, qualifying shares may be registered in
the name of directors.
(2) 60% owned subsidiary.
(3) 75% owned subsidiary.
(4) 80% owned subsidiary.
(5) 50% owned joint venture.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>5
<FILENAME>ex-23.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective Amendment No. 2
to Registration Statement No. 2-75618 on Form S-8 dated September 12, 1988,
Post-Effective Amendment No. 3 to Registration Statement No. 2-70180 on Form S-8
dated April 8, 1983, Registration Statement No. 33-18565 on Form S-8 dated
December 14, 1987, Registration Statement No. 333-13369 on Form S-8 dated
October 3, 1996 and Registration Statement No. 333-45903 on Form S-8 dated
February 10, 1998 of Volt Information Sciences, Inc. of our report dated
December 20, 2001, except for Note E as to which the date is February 1, 2002,
with respect to the consolidated financial statements and schedule of Volt
Information Sciences, Inc. and subsidiaries included in the Form 10K for the
year ended November 4, 2001.
Ernst & Young LLP
New York, New York
February 1, 2002
EXHIBIT 23
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----