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
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