- Operating profit of $4.8 million in
fiscal 2014 from a loss of $7.3 million in 2013
- Proforma operating profit of $2.1
million in fiscal 2014 from a loss of $13.3 million in 2013
- Exited several non-core businesses in
2014 to enhance profitability
Volt Information Sciences, Inc. (NYSE-MKT:VISI) today reported
financial results for its fiscal year and fourth quarter ended
November 2, 2014. The reported net loss for fiscal year 2014 was
$19.0 million, or $0.91 per share, compared with $30.9 million, or
$1.48 per share, in 2013. Operating results from continuing
operations improved $12.1 million in 2014 to income of $4.8 million
from a loss of $7.3 million in 2013. Including Unrecognized
Revenue, proforma operating results from continuing operations
improved $15.4 million in 2014 to proforma operating income of $2.1
million from a proforma loss of $13.3 million in 2013. Proforma
amounts include Unrecognized Revenue (defined below).
“Consistent with our primary goal of a more highly focused and
profitable Volt, we have now exited our software businesses. Each
of these had significant upfront capital investments with extended
payback periods and were producing significant losses, and we are
now concentrating on our core staffing and services businesses that
have similar profitability, risks and returns on capital,” said Ron
Kochman, President and Chief Executive Officer. “We have also made
substantial progress in adjusting our expense structure, and are
pleased with our improvements to operating income. We continue to
focus on streamlining costs and are well positioned to increase
profitability in the future, particularly when revenues
increase.”
Fiscal Year 2014 Operating Results and Revenue
Net loss in 2014 of $19.0 million (proforma $21.7 million)
included restatement, investigations and remediation expenses of
$5.3 million, restructuring costs of $2.5 million ($0.5 million
reflected in corporate general and administrative), losses from
discontinued operations of $15.6 million, a $1.0 million cost in
our workers compensation program related to multiple previous
years, and a $1.4 million true-up of non-U.S. income taxes related
to multiple previous years. Without these items net income in 2014
would have been $6.8 million and proforma net income $4.1
million.
Net loss in 2013 of $30.9 million (proforma $37.0 million)
included restatement, investigations and remediation expenses of
$24.8 million, restructuring costs of $0.8 million, losses from
discontinued operations of $18.1 million, a $3.0 million indirect
tax recovery related to multiple years, and approximately $1.1
million of operating income from the 53rd week in 2013. Without
these items net income in 2013 would have been $8.7 million and
proforma net income $2.6 million.
Excluding the $3.0 million multi-year indirect tax recovery and
approximately $1.1 million from the 53rd week in 2013, the Staffing
Services segment operating income and direct margin percentage
improved as a result of decreased administrative and other
operating costs, the reorganization of the traditional staffing
business, the divestiture of the Vendor Management Software
business, and management’s continuing initiative to reduce exposure
to customers with unfavorable business terms and improved results
in Volt’s call center, games testing and other project-based
staffing services. Increased or flat direct margin percentages were
achieved in each quarter of 2014 compared to the comparative
quarter in 2013.
Net revenue from continuing operations in 2014 decreased
approximately 15% compared to 2013 and in the Staffing Services
segment decreased approximately 16% as a result of lower demand
primarily at large enterprise customers and management’s continuing
initiative to reduce exposure to customers with unfavorable
business terms, and the impact of 2014 consisting of 52 weeks while
2013 consisted of 53 weeks. However, a modest increase in average
daily revenue was achieved sequentially in both the third and
fourth quarters of 2014, marking the first two sequential quarterly
increases since the company began its initiative to exit or reduce
business levels with customers where profitability or business
terms are unfavorable.
As previously reported, the Company sold its Computer Systems
segment in the first quarter of fiscal 2015. The results of the
Computer Systems segment are presented as discontinued operations
and, as such, have been excluded from continuing operations and
from segment results for all periods presented.
Condensed Consolidated Results of Operations by
Segment
Unaudited (in Thousands)
Results of Operations by Segment (Twelve Months 2014 vs.
Twelve Months 2013)
Twelve months ended November 2, 2014
Twelve months ended November 3, 2013 Total
StaffingServices
Other Total
StaffingServices
Other Revenue Staffing service
revenue $ 1,599,046 $ 1,599,046 $ - $ 1,899,723 $ 1,899,723 $-
Other revenue 110,982 - 110,982
117,749 -
117,749
Net revenue 1,710,028 1,599,046 110,982 2,017,472
1,899,723 117,749
Expenses
Direct cost of staffing services
revenue
1,359,048 1,359,048 - 1,627,166 1,627,166 - Cost of other revenue
92,440 - 92,440 94,519 - 94,519 Selling, administrative and other
operating costs 231,104 212,471 18,633 267,969 246,964 21,005
Amortization of purchased intangible assets 181 101 80 511 34 477
Restructuring costs 2,010 1,431 579 781 781 - Indirect tax recovery
- - -
(2,967 ) (2,967 ) - Segment operating income
(loss) 25,245 25,995 (750 ) 29,493 27,745 1,748 Corporate general
and administrative 15,198 11,917 Restatement, investigations and
remediation 5,261 24,828
Operating
income (loss) 4,786 (7,252 ) Other income (expense), net (2,947
) (2,569 ) Income tax provision 5,226 2,922
Net loss from continuing operations (3,387 ) (12,743
) Loss from discontinued operations, net of taxes (15,601 )
(18,132 )
Net loss $ (18,988 ) $ (30,875 )
NON-GAAP PROFORMA Twelve months ended November 2,
2014 Twelve months ended November 3,
2013 Total
StaffingServices
Other Total
StaffingServices
Other Net revenue $ 1,710,028 $ 1,599,046 $110,982 $
2,017,472 $ 1,899,723 $ 117,749 Recognition of previously
unrecognized revenue (5,313 ) (5,088 ) (225 ) (11,166 ) (11,166 ) -
Additions to unrecognized revenue 2,625 2,563
62 5,094
4,869 225 Net non-GAAP proforma adjustment
(2,688 ) (2,525 ) (163 ) (6,072
) (6,297 ) 225
Proforma net revenue
1,707,340 1,596,521 110,819
2,011,400 1,893,426
117,974
Expenses Direct cost of staffing services
revenue 1,359,048 1,359,048 - 1,627,166 1,627,166 - Cost of other
revenue 92,440 - 92,440 94,519 - 94,519 Selling, administrative and
other operating costs 231,104 212,471 18,633 267,969 246,964 21,005
Amortization of purchased intangible assets 181 101 80 511 34 477
Restructuring costs 2,010 1,431 579 781 781 - Indirect tax recovery
- - -
(2,967 ) (2,967 ) -
Proforma segment
operating income (loss) 22,557 23,470 (913 ) 23,421 21,448
1,973
Proforma operating income (loss) 2,098 (13,324
)
Proforma net loss from continuing operations $
(6,075 ) $ (18,815 )
Fourth Quarter Revenue and Operating Results
Net revenue in the fourth quarter of fiscal 2014 decreased $98.1
million to $429.7 million from $527.8 million in fiscal 2013, and
proforma net revenue decreased $95.9 million, or 18.2%, to $429.6
million from $525.5 million in 2013. The decrease in revenue was
primarily the result of decreased Staffing Services revenues of
$89.7 million (proforma of $87.9 million) to $403.1 million
(proforma $403.0 million) resulting from lower demand primarily at
our enterprise customers, but also to a lesser extent at our retail
customers, and our continuing initiative to reduce exposure to
customers with unfavorable business terms and the impact of 2014
consisting of 52 weeks while 2013 consisted of 53 weeks. The Other
segment revenues decreased $8.4 million to $26.6 million primarily
from lower volume in the information technology infrastructure
services, telecommunication infrastructure and security services
and printing businesses.
Net income in the fourth quarter of 2014 of $2.1 million, or
$0.10 per share, (proforma $2.0 million) included restructuring
costs of $0.7 million ($0.2 million reflected in corporate general
and administrative), losses from discontinued operations of $2.4
million, and a $1.0 million cost in our workers compensation
program related to multiple years. Without these items net income
in the fourth quarter of 2014 would have been $6.2 million and
proforma net income $6.1 million.
Net income in the fourth quarter of 2013 of $1.6 million, or
$0.08 per share, (proforma loss $0.7 million) included restatement,
investigations and remediation expenses of $2.4 million,
restructuring costs of $0.2 million, losses from discontinued
operations of $8.3 million, and approximately $1.1 million of
operating income from the 53rd week in 2013. Without these items
net income in the fourth quarter of 2013 would have been $11.4
million and proforma net income $9.1 million.
Despite the decrease in revenue, the Staffing Services segment
operating income and direct margin rate improved as a result of
actions taken in recent quarters including the reorganization of
the traditional staffing business, the divestiture of the
ProcureStaff business, the continuing initiative to reduce exposure
to customers with unfavorable business terms, and approximately
$1.1 million of operating income from the 53rd week in 2013. These
improvements were offset by a decline in operating results in our
Other segment of $2.9 million (proforma $2.4 million) primarily
from decreased volume and lower margins.
Unrecognized Revenue - Non-GAAP Proforma Measures
– 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 because it provides 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.
Condensed Consolidated Results of Operations by
Segment
Unaudited (in Thousands)
Results of Operations by Segment (Fourth Quarter 2014 vs.
Fourth Quarter 2013)
Three months ended November 2, 2014
Three months ended November 3, 2013 Total
StaffingServices
Other Total
StaffingServices
Other Revenue
Staffing service revenue $ 403,065 $ 403,065 $ - $ 492,784 $
492,784 $ - Other revenue 26,606 -
26,606 35,024
- 35,024
Net revenue
429,671 403,065 26,606 527,808 492,784 35,024
Expenses Direct cost of staffing services revenue 337,045
337,045 - 416,669 416,669 - Cost of other revenue 21,922 - 21,922
26,245 - 26,245 Selling, administrative and other operating costs
56,440 51,301 5,139 66,951 60,346 6,605 Amortization of purchased
intangible assets 25 25 - 126 7 119 Restructuring costs 533
155 378 222
222 - Segment
operating income (loss) 13,706 14,539 (833 ) 17,595 15,540 2,055
Corporate general and administrative 7,642 4,812 Restatement,
investigations and remediation - 2,462
Operating income 6,064 10,321 Other income (expense), net
(391 ) (760 ) Income tax provision (benefit) 1,164
(340 )
Net income from continuing operations 4,509
9,901 Loss from discontinued operations, net of taxes (2,448
) (8,281 )
Net income $ 2,061 $ 1,620
NON-GAAP PROFORMA Three months ended November 2,
2014 Three months ended November 3, 2013 Total
StaffingServices
Other Total
StaffingServices
Other Net revenue $ 429,671 $ 403,065 $ 26,606 $
527,808 $ 492,784 $ 35,024 Recognition of previously unrecognized
revenue (2,719 ) (2,635 ) (84 ) (7,396 ) (6,809 ) (587 ) Additions
to unrecognized revenue 2,621 2,563
58 5,055
4,939 116 Net non-GAAP proforma
adjustment (98 ) (72 ) (26 )
(2,341 ) (1,870 ) (471 )
Proforma net revenue 429,573
402,993 26,580 525,467
490,914 34,553
Expenses Direct cost of staffing services revenue 337,045
337,045 - 416,669 416,669 - Cost of other revenue 21,922 - 21,922
26,245 - 26,245 Selling, administrative and other operating costs
56,440 51,301 5,139 66,951 60,346 6,605 Amortization of purchased
intangible assets 25 25 - 126 7 119 Restructuring costs 533
155 378 222
222 -
Proforma
segment operating income (loss) 13,608 14,467 (859 ) 15,254
13,670 1,584
Proforma operating income 5,966 7,980
Proforma net income from continuing operations $
4,411 $ 7,560
Liquidity
During fiscal 2014, in connection with continuing operations the
Company disbursed $7.3 million for the restatement, investigations
and remediation in the first half of the year and provided cash
from all other operating activities $42.9 million. Of this amount,
$18.1 million was used to reduce borrowing as our receivable
collateral amount reduced and $17.5 million in funding the
discontinued Computer Systems segment. The Company used $2.2
million for capital expenditures, net of $3.1 million received from
the sale of property, equipment and software, and received $0.9
million for the sale of investments net of purchases.
Condensed Consolidated Statements of Cash Flows
(in Thousands)
Twelve months ended
November 2,2014
November 3,2013
Cash and cash equivalents, beginning of the period
$9,846 $24,415 Cash used in
connection with restatement, investigations and remediation costs
(7,255) (37,292) Other changes in operating assets and liabilities
33,898 24,422 Cash provided by (used in) all other operating
activities 8,937 (1,050)
Net cash provided by
(used in) operating activities 35,580
(13,920) Net cash used in investing activities
(1,281) (8,558) Net release of
cash restricted as collateral for borrowings 21,349 3,796 Net cash
provided by (used in) all other financing activities (39,476)
21,499
Net cash provided by (used in) financing
activities (18,127) 25,295
Effect of exchange rate changes on cash and cash equivalents
(386) 1,376 Net cash used in discontinued
operations (17,513) (19,563)
Net decrease in cash and cash equivalents
(1,727) (15,370) Change in
cash from discontinued operations 986
801 Cash and cash equivalents, end of the
period $9,105 $9,846 Cash
paid during the period: Interest $3,539 $2,925 Income taxes
$4,948 $10,557
On November 2, 2014, excluding $8.1 million of long-term debt,
the company’s consolidated borrowings were $128.5 million, which
included $8.5 million of foreign currency borrowings that are fully
collateralized by restricted cash used primarily to hedge net
investments in foreign subsidiaries, and $120.0 million drawn under
the short-term financing program. The company had cash and cash
equivalents of $9.1 million and an additional $10.4 million of cash
restricted as collateral for foreign currency credit lines and
banking facilities. Based on current collateral levels (certain
staffing segment receivables) the company also had approximately
$27.4 million available under the short-term financing program. One
of the Company’s credit agreements contains a covenant that limits
cash dividends, capital stock purchases and redemptions in any one
fiscal year to the greater of $5.0 million or 50% of the prior
year’s consolidated net income, as defined.
Condensed Consolidated Balance Sheets
(in Thousands, except share amounts)
November 2, 2014 November 3,
2013 ASSETS CURRENT ASSETS: Cash and cash
equivalents $9,105 $9,846 Restricted cash and short-term
investments 32,436 53,500 Trade accounts receivable, net of
allowances of $868 and $1,693, respectively 248,101 282,571
Recoverable income taxes 18,311 15,030 Prepaid insurance and other
current assets 26,255 32,821 Assets held for sale 24,220
30,618
TOTAL CURRENT ASSETS 358,428
424,386 Prepaid insurance and other assets, excluding
current portion 39,600 44,428 Property, equipment and software, net
26,304 32,526
TOTAL ASSETS $424,332
$501,340 LIABILITIES AND
STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accrued
compensation $41,182 $51,438 Accounts payable 55,873 55,138 Accrued
taxes other than income taxes 17,099 18,842 Accrued insurance and
other 39,104 37,813 Deferred revenue, net, current portion 3,491
4,205 Short-term borrowings, including current portion of long-term
debt 129,417 168,114 Liabilities held for sale 19,126
26,690
TOTAL CURRENT LIABILITIES 305,292
362,240 Accrued insurance and other, excluding current
portion 11,787 12,794 Deferred revenue, net, excluding current
portion 87 46 Income taxes payable, excluding current portion 8,556
7,892 Long-term debt, excluding current portion 7,216
8,127
TOTAL LIABILITIES 332,938 391,099
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 - 23,610,103 and 23,536,769,
respectively; Outstanding - 20,922,796 and 20,849,462,
respectively
2,361
2,354
Paid-in capital 73,194 72,003 Retained earnings 64,119 83,007
Accumulated other comprehensive loss (6,400) (5,243) Treasury
stock, at cost; 2,687,307 shares (41,880) (41,880)
TOTAL STOCKHOLDERS' EQUITY 91,394
110,241 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$424,332 $501,340
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), information technology infrastructure services,
telecommunication infrastructure and security services, and
telephone directory publishing and printing in Uruguay. Our
staffing services consists of workforce solutions that include
providing contingent workers, personnel recruitment services, and
managed staffing services programs supporting primarily
professional administration, technical, information technology and
engineering positions. Our project-based staffing assists with
individual customer assignments as well as customer care call
centers and gaming industry quality assurance testing services, and
our managed service programs consist of managing the procurement
and on-boarding of contingent workers from multiple providers. Our
information technology infrastructure services provide server,
storage, network and desktop IT hardware maintenance, data center
and network monitoring and operations. For more information 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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