VISI Volt Information Sciences Inc

Volt Information Sciences, Inc. (OTC:VISI) today reported financial results for its fiscal first quarter ended February 2, 2014. The company reported a net loss in the first quarter of 2014 of $17.1 million, or $0.82 per share, unchanged from the first quarter of 2013. On a proforma basis the company reported a net loss in the first quarter of 2014 of $16.0 million compared to a proforma net loss in the first quarter of 2013 of $19.6 million.

“At the beginning of the quarter we reorganized our traditional staffing services business to better facilitate efficiency and profitability, and we are continuing our initiative to exit or reduce staffing business levels with customers where profitability or business terms are unfavorable. While we are disappointed at the lower demand levels at a few of our large customers compared to last year that was the primary cause of lower staffing segment operating income, we are pleased that our initiatives resulted in higher margin ratios and traditional staffing costs that decreased largely consistent with the lower revenues” said Ron Kochman, President and Chief Executive Officer. “We divested ProcureStaff, our VMS business, as this business no longer met our return parameters for growth and profitability. These are steps in an ongoing process as we seek to prioritize profitability over topline growth, creating greater value for our shareholders. We are also pleased to report that Volt’s first quarter 2014 earnings results will be filed on schedule for the first time since 2009, a significant achievement in the company’s multi-year financial restatement and remediation process.”

Operating Results

Net revenue in the first quarter of fiscal 2014 decreased $83.1 million to $437.1 million from $520.2 million in fiscal 2013, and proforma net revenue decreased $79.4 million or 15.3% to $438.3 million from $517.7 million in fiscal 2013. The change in revenue was the result of decreased Staffing Services revenues of $82.1 million (proforma of $78.4 million) resulting primarily from fewer contingent workers on assignment at a few large customers whose current demand levels are lower than in the prior year, lower revenues resulting from our exit of certain customers as part of our continued focus on exiting or reducing business levels with customers where profitability or business terms are unfavorable, slightly lower managed services revenue, and $3.7 million higher net staffing Unrecognized Revenue (defined below). In addition, Computer Systems revenues decreased $4.7 million from several large directory assistance implementations reaching the end of the maintenance periods over which the projects were being amortized, lower transaction volumes, and lower pricing and maintenance levels. These decreases were partially offset by higher information technology infrastructure services revenue driven primarily by new customers and to a lesser extent from net expanded business with existing customers at billing rates that remained relatively consistent between the periods, and a $1.2 million deferral of revenue in 2013.

Operating loss in the first quarter of fiscal 2014 of $15.0 million included restatement, investigations and remediation costs of $4.7 million and restructuring costs of $1.4 million as we reduced headcount in response to lower revenue levels and the sale of our vendor management system software related assets. Without these items we would have had an operating loss of $8.9 million and a proforma loss of $7.8 million. Operating loss in the first quarter of fiscal 2013 of $16.8 million included restatement, investigations and remediation costs of $13.8 million, a $3.0 million indirect tax recovery related to multiple years and restructuring costs of $0.7 million as we reduced headcount in response to lower revenue levels. Without these items we would have had operating loss of $5.3 million and a proforma operating loss of $7.8 million. The changes in operating loss and proforma operating loss in the first quarter of fiscal 2014 from 2013 were due to the above reasons and a $4.2 million impact from lower Staffing Services revenue.

 

Condensed Consolidated Results of Operations by Segment

Unaudited (in Thousands)

 

Results of Operations by Segment (Fiscal First Quarter 2014 vs. First Quarter 2013)

   

Three months ended February 2, 2014

      Three months ended January 27, 2013 Total  

StaffingServices

 

ComputerSystems

  Other       Total  

StaffingServices

 

ComputerSystems

  Other Revenue                   Staffing service revenue $ 392,269 $ 392,269 $ - $ - $ 474,362 $ 474,362 $ - $ - Other revenue   44,879       -       15,520       29,359         45,843       -       20,226      

25,617

  Net revenue 437,148 392,269 15,520 29,359 520,205 474,362 20,226 25,617   Expenses

Direct cost of staffingservices revenue

341,460 341,460 - - 411,993 411,993 - - Cost of other revenue 37,278

 

- 13,145 24,133 39,753 - 17,815 21,938

Selling, administrative andother operating costs

64,150

54,266 5,277 4,607 68,047 57,943 5,529 4,575

Amortization of purchasedintangible assets

319 25 215 79 345 12 214 119 Restructuring costs   1,361       657       704       -         740       285       455       -  

Segment operating income(loss)

(7,420 ) (4,139 )

 

(3,821 ) 540 (673 ) 4,129 (3,787 ) (1,015 )

Corporate generaland administrative

2,958 2,290

Restatement,investigations andremediation

  4,668  

 

  13,820   Operating loss (15,046 ) (16,783 )

Other income (expense),net

(979 ) 269 Income tax provision   1,049     576   Net loss $ (17,074 ) $ (17,090 )  

NON-GAAPPROFORMA TABLE

Three months ended February 2, 2014       Three months ended January 27, 2013 Total  

StaffingServices

 

ComputerSystems

  Other       Total  

StaffingServices

 

ComputerSystems

  Other Net revenue $ 437,148 $ 392,269 $ 15,520 $ 29,359 $ 520,205 $ 474,362 $ 20,226 $ 25,617

Recognition of previouslyunrecognized revenue

(5,048 ) (5,048 ) - - (9,113 ) (9,113 ) - -

Additions to unrecognizedrevenue

  6,160       6,160       -       -         6,571       6,571       -       -  

Net non-GAAP proformaadjustment

  1,112       1,112       -       -         (2,542 )     (2,542 )     -       -  

Non-GAAP proforma netrevenue

  438,260       393,381       15,520       29,359         517,663       471,820       20,226       25,617   Expenses

Direct cost of staffingservices revenue

341,460 341,460 - - 411,993 411,993 - - Cost of other revenue 37,278 - 13,145 24,133 39,753 - 17,815 21,938

Selling, administrative andother operating costs

64,150 54,266 5,277 4,607 68,047 57,943 5,529 4,575

Amortization of purchasedintangible assets

319 25 215 79 345 12 214 119 Restructuring costs   1,361       657       704       -         740       285       455       -  

Non-GAAP proformasegment operatingincome (loss)

(6,308 ) (3,027 ) (3,821 ) 540 (3,215 ) 1,587 (3,787 ) (1,015 )  

Non-GAAP proformaoperating loss

(13,934 ) (19,325 )  

Non-GAAP proforma netloss

$ (15,962 ) $ (19,632 )  

Non-GAAP Proforma Measures – Unrecognized Revenue – Volt sometimes provides services despite a customer arrangement not yet being finalized, or continues to provide services under an expired arrangement while a renewal arrangement is being finalized. Generally Accepted Accounting Principles (“GAAP”) usually requires that services revenue be deferred until arrangements are finalized or in some cases until cash is received, which causes some periods to include the expense of providing services although the related revenue is not recognized until a subsequent period (“Unrecognized Revenue”). The discussion herein refers to financial data determined both using GAAP as well as on a non-GAAP proforma basis. The non-GAAP proforma basis includes adjustments for Unrecognized Revenue so that revenue is shown in the same period as the related services are provided. This non-GAAP financial information is used by management and provided herein primarily to provide a more complete understanding of the company’s business results and trends. In addition, the company believes that lenders, analysts and others in the investment community use this non-GAAP financial information to assess the company’s historical results, and that failure to report this non-GAAP measure could result in a potentially misplaced perception that the company’s results have either met, exceeded or underperformed expectations. This non-GAAP information should not be considered an alternative for, or in isolation from, the financial information prepared and presented in accordance with GAAP. In addition, this measure may not be comparable to similarly titled measures used by other companies.

First Quarter Results By Segment

Staffing Services

The company’s Staffing Services segment net revenue in the first quarter of fiscal 2014 decreased $82.1 million to $392.3 million from $474.4 million in fiscal 2013, and proforma net revenue decreased by $78.4 million, or 16.6%, to $393.4 million from $471.8 million in fiscal 2013. This decrease is primarily due to fewer contingent workers on assignment at a few large customers whose current demand levels are lower than in the prior year, lower revenues resulting from our exit of certain customers as part of our continued focus on exiting or reducing business levels with customers where profitability or business terms are unfavorable, slightly lower managed services revenue, and $3.7 million higher net staffing Unrecognized Revenue.

Direct cost of Staffing Services revenue in the first quarter of fiscal 2014 decreased $70.5 million, or 17.1%, to $341.5 million from $412.0 million in fiscal 2013. This decrease was primarily the result of fewer contingent staff on assignment, although at higher proforma margins, and lower managed service program costs consistent with the related decrease in revenues. Direct margin of Staffing Services revenue as a percent of staffing revenue and proforma staffing revenue in 2014 was 13.0% and 13.2% from 13.1% and 12.7% in 2013, respectively. The direct margin and proforma direct margin increased by 0.5% primarily due to higher traditional staffing margins. This increase was offset by a 0.6% decrease in the GAAP direct margin due to higher net staffing Unrecognized Revenue in the first quarter of fiscal 2014 from 2013.

Staffing Services segment operating results in the first quarter of 2014 decreased by $8.2 million to a loss of $4.1 million from income of $4.1 million in fiscal 2013, and proforma operating results decreased $4.6 million to a loss of $3.0 million from income of $1.6 million in fiscal 2013. The decrease in operating results is primarily due to lower direct margins of $7.9 million and 2013 including a $3.0 million indirect tax recovery, partially offset by a decrease in selling administrative and other operating costs of $6.6 million in response to the decline in staffing revenues and the reorganization of our North American staffing operations.

Computer Systems

The company’s Computer Systems segment net revenue in the first quarter of fiscal 2014 decreased $4.7 million, or 23.3%, to $15.5 million from $20.2 million in fiscal 2013. This decrease was primarily the result of several large directory assistance implementations reaching the end of the maintenance periods over which the projects were being amortized, lower transaction volumes, and lower pricing and maintenance levels.

Computer Systems segment operating loss in the first quarter of fiscal 2014 and 2013 remained consistent at $3.8 million primarily from the impact of the segment's restructuring activities and lower revenues offset by lower costs, offset by our continued investment in developing our directory assistance software platform into full-featured call center software and our related sales efforts.

Other

The company’s Other reportable segment net revenue in the first quarter of fiscal 2014 increased $3.8 million, or 14.6%, to $29.4 million from $25.6 million in fiscal 2013. The increase is primarily due to higher information technology infrastructure services revenue driven primarily by new customers and to a lesser extent from net expanded business with existing customers, at billing rates that remained relatively consistent between the periods, and a $1.2 million deferral of revenue in the first quarter of 2013.

Other reportable segment operating results in the first quarter of fiscal 2014 increased $1.5 million to income of $0.5 million from a loss of $1.0 million in fiscal 2013, primarily due to a $1.2 million deferral of revenue in 2013 and higher revenue and margins in 2014.

Liquidity

During the first quarter of fiscal 2014, the company disbursed $1.6 million in connection with the restatement, investigations and remediation costs and provided cash from all other operating activities of $24.3 million. The company received $3.0 million from the sale of software related assets, used $1.5 million for capital expenditures and received $0.4 million for the sale of investments net of purchases. Borrowing under the accounts receivable securitization program and other short-term borrowings decreased by $22.3 million.

 

Condensed Consolidated Statements of Cash Flows

Unaudited (in Thousands)

  Three months ended

February 2,2014

 

January 27,2013

Cash and cash equivalents, beginning of the period $ 11,114   $ 26,483  

Cash used in connection with restatement, investigations andremediation costs

(1,598 ) (15,183 ) Cash provided by all other operating activities   24,301       26,969   Net cash provided by operating activities   22,703       11,786     Net cash provided by (used in) investing activities   1,889       (2,159 )   Net cash restricted as collateral for borrowings (16 ) (24 ) Net cash used in all other financing   (22,516 )     (10,144 ) Net cash used in financing activities   (22,532 )     (10,168 )   Effect of exchange rate changes on cash and cash equivalents 178 (438 )   Net increase (decrease) in cash and cash equivalents   2,238       (979 )   Cash and cash equivalents, end of the period $ 13,352     $ 25,504     Cash paid during the period: Interest $ 953 $ 708 Income taxes $ 1,213 $ 8,253  

On February 2, 2014, the company had cash and cash equivalents of $13.4 million and an additional $31.8 million of cash restricted as collateral for foreign currency credit lines and banking facilities. The company also had approximately $20.4 million available from its short-term financing program. Excluding $9.6 million of long-term debt, the company’s consolidated borrowings were $145.0 million at February 2, 2014, which included $22.2 million of foreign currency borrowings used primarily to hedge net investments in foreign subsidiaries that are fully collateralized by restricted cash, and $120.0 million drawn under the $200.0 million short-term financing program.

 

Condensed Consolidated Balance Sheets

Unaudited (in Thousands, except share amounts)

    February 2, 2014   November 3, 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 13,352 $ 11,114 Restricted cash and short-term investments 51,807 53,500 Trade accounts receivable, net of allowances of $1,647 and $1,811, respectively 252,027 293,305 Recoverable income taxes 16,252 17,150 Prepaid insurance and other current assets   31,270       35,345   TOTAL CURRENT ASSETS 364,708 410,414 Prepaid insurance and other assets, excluding current portion 51,423 52,574 Property, equipment and software, net   32,649       37,324   TOTAL ASSETS $ 448,780     $ 500,312     LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accrued compensation $ 46,815 $ 53,474 Accounts payable 48,729 57,165 Accrued taxes other than income taxes 23,558 19,520 Accrued insurance and other 43,423 44,133 Deferred revenue, net, current portion 12,673 13,335 Short-term borrowings, including current portion of long-term debt   145,899       168,114   TOTAL CURRENT LIABILITIES 321,097 355,741 Accrued insurance and other, excluding current portion 13,834 14,705 Deferred revenue, net, excluding current portion 3,151 2,839 Income taxes payable, excluding current portion 8,756 8,659 Long-term debt, excluding current portion   7,906       8,127   TOTAL LIABILITIES 354,744 390,071   Commitments and contingencies   STOCKHOLDERS' EQUITY: Preferred stock, par value $1.00; Authorized - 500,000 shares; Issued – none - - Common stock, par value $0.10; Authorized - 120,000,000 shares;

Issued - 23,536,769; Outstanding - 20,849,462;

2,354

2,354

Paid-in capital 72,174 72,003 Retained earnings 66,196 83,007 Accumulated other comprehensive loss (4,808 ) (5,243 ) Treasury stock, at cost; 2,687,307 shares   (41,880 )     (41,880 ) TOTAL STOCKHOLDERS' EQUITY   94,036       110,241   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 448,780     $ 500,312    

About Volt Information Sciences, Inc.

Volt Information Sciences, Inc. is an international provider of staffing services (traditional time and materials based as well as project based), contact center computer systems, information technology and telecommunications infrastructure services, and telephone directory publishing and printing in Uruguay. Our staffing services include a suite of workforce solutions that include providing contingent personnel, personnel recruitment services, and managed staffing services programs supporting primarily professional administration, technical, information technology and engineering positions. Our contact center computer systems provide the functionality for telecommunications company directory assistance services and for corporate and government call centers, operator services, and database management. Our information technology infrastructure services provide a single-source alternative to original equipment manufacturer and other independent IT service providers for server, storage, network and desktop IT hardware maintenance, data center and network monitoring and operations, and designing, deploying and supporting corporate technology upgrade and refresh programs, as well as design, engineering, construction, installation and maintenance of voice, data, video and utility infrastructure. Visit www.volt.com.

Forward-Looking Statements

This press release contains forward-looking statements that are subject to a number of known and unknown risks, including, among others, general economic, competitive and other business conditions, the degree and timing of customer utilization and rate of renewals of contracts with the company, and the degree of success of business improvement initiatives that could cause actual results, performance and achievements to differ materially from those described or implied in the forward-looking statements. Information concerning these and other factors that could cause actual results to differ materially from those in the forward-looking statements are contained in company reports filed with the Securities and Exchange Commission. Copies of the company’s latest Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as filed with the Securities and Exchange Commission, are available without charge upon request to Volt Information Sciences, Inc., 1065 Avenue of the Americas, New York, New York 10018, Attention: Shareholder Relations, 212-704-7921. These and other SEC filings by the company are also available to the public over the Internet at the SEC’s website at http://www.sec.gov and at the company’s website at http://www.volt.com in the Investor & Governance section.

Volt Information Sciences, Inc.James Whitney, 212-704-7921voltinvest@volt.com