- Reported revenue of $385.2 million
- Loss from continuing operations of $6.9
million, including special items totaling $8.9 million for
impairment, foreign exchange loss and other charges
- Staffing Services segment operating
income, excluding special items, of $7.1 million
- Staffing Services segment direct margin
percentage improved
- The Company to divest Uruguayan
Printing and Publishing and Volt Telecommunications businesses as
part of an active review of its businesses and assets
Volt Information Sciences, Inc. (NYSE-MKT: VISI) today reported
financial results for its second quarter and first six months ended
May 3, 2015. The reported net loss for the second quarter of fiscal
2015 was $6.9 million, or $0.33 per share, compared with $3.5
million, or $0.16 per share, in the second quarter of 2014.
Operating results from continuing operations for the second quarter
of 2015 decreased $9.0 million to an operating loss from continuing
operations of $4.1 million from operating income from continuing
operations of $4.9 million in the second quarter of 2014.
Loss from continuing operations in the second quarter of 2015 of
$6.9 million included special items related to impairments of $5.4
million, foreign exchange loss of $1.6 million and other special
items of $1.9 million, including the settlement of a lawsuit,
shareholder and board related costs and restructuring charges.
Excluding the impact of these special items of $8.9 million, income
from continuing operations for the second quarter of 2015 would
have been $2.0 million.
Staffing Services segment operating income in the second quarter
of 2015 of $5.9 million included $1.2 million of special items
related to an impairment charge of $1.0 million and restructuring
costs of $0.2 million. Excluding the impact of these special items,
Staffing Services segment operating income would have been $7.1
million.
As previously reported, the Company sold its Computer Systems
segment in the first quarter of fiscal 2015. The loss from
discontinued operations, net of taxes was $4.9 million in the
second quarter of 2014.
Income from continuing operations in the second quarter of 2014
of $1.4 million included special items related to restructuring
costs of $1.0 million ($0.3 million reflected in corporate general
and administrative), a loss related to foreign exchange rates of
$0.6 million and restatement, investigations and remediation
expenses of $0.6 million. Excluding these special items, income
from continuing operations in the second quarter of 2014 would have
been $3.6 million.
Staffing Services segment operating income in the second quarter
of 2014 of $7.5 million included $0.6 million of special items
related to restructuring costs. Excluding the impact of this
special item, Staffing Services segment operating income would have
been $8.1 million.
“I am pleased with our progress as we work towards our goal of
becoming a more highly focused and profitable company,” said Ron
Kochman, President and Chief Executive Officer. “While I am
disappointed with our overall revenue performance, some of the
decline in our revenues, as well as the sequential decline in our
average daily revenues in our North American staffing business,
were due to our own actions to exit unprofitable business and our
disciplined approach to new customer acquisition. Although I am
pleased with our progress on these fronts, our revenues were also
impacted by softer demand trends and delayed projects with some
customers. We understand that we must bend the curve on revenue and
we believe that we are poised to do so as we had some nice client
wins in the quarter. We are pleased to have our new board of
directors in place and consistent with our commitment to exit
non-core operations to divest our Uruguayan Printing and Publishing
and Volt Telecommunications businesses as we continue to focus our
operations, infrastructure, and business practices to deliver
superior client service and work towards our strategic goals.”
“In the second quarter, year-over-year reported income from
continuing operations was down $8.3 million and included a number
of special items,” said Paul Tomkins, Chief Financial Officer. “Our
operational performance excluding special items would have been
$2.0 million, or $1.6 million below the same period last year. We
anticipate that our results will normalize as we continue to focus
on our core operations and execute our strategy, including our
initiatives to reduce complexity, identify and address
inefficiencies, and continue to make prudent choices to simplify
the organization. We are also committed to improving our operating
cash flow and strengthening our balance sheet. Overall, our efforts
are ongoing and will take some time, but we believe that improving
our business processes and upgrading our operational tools is a
business imperative and will contribute to our longer-term growth,
profitability, and cash flow, and improve shareholder value.”
Second Quarter Revenue and Operating Results
Net revenue in the second quarter of fiscal 2015 decreased $50.9
million, or 11.7%, to $385.2 million from $436.1 million in fiscal
2014. The decrease in revenue was primarily the result of decreased
Staffing Services revenues of $44.4 million, or 10.9%, to $362.3
million primarily driven by lower demand for both our technical and
to a lesser degree non-technical administrative and light
industrial ("A&I") skill-sets. Our fiscal 2014 top 20 customers
on a comparable basis with the current year accounted for
approximately 80% of the overall decline in revenue. Furthermore,
revenue decreased partially due to our continued focus on reducing
business levels with customers where profitability or contract
terms are unfavorable. Despite the decrease in revenue, the
Staffing Services segment direct margin rate improved in our
project-based and managed service programs.
The Other segment revenues decreased $6.4 million, or 21.9%, to
$22.9 million primarily due to information technology
infrastructure services primarily from a large project in the
second quarter of 2014 and non-recognition of revenue related to a
customer experiencing financial difficulty as well as lower
telecommunication infrastructure and security services as we exited
the telecommunications government solution business during the
second quarter of 2014.
Condensed Consolidated Results of
Operations by Segment
Unaudited (in thousands)
Results of Operations by Segment
(Second Quarter 2015 vs. Second Quarter 2014)
Three months ended May 3, 2015 Three
months ended May 4, 2014 Total
StaffingServices
Other Total
StaffingServices
Other Revenue
Staffing services revenue $ 362,277 $ 362,277 $ - $ 406,733 $
406,733 $ - Other revenue 22,912 -
22,912 29,347 -
29,347
Net revenue 385,189
362,277 22,912 436,080 406,733
29,347 Expenses Direct cost of staffing
services revenue 305,116 305,116 - 344,922 344,922 - Cost of other
revenue 19,909 - 19,909 24,066 - 24,066 Selling, administrative and
other operating costs 54,325 50,034 4,291 58,238 53,778 4,460
Restructuring costs 251 275 (24 ) 679 577 102 Impairment charges
5,374 977 4,397
- - - Segment operating
income (loss) 214 5,875 (5,661 ) 8,175 7,456 719 Corporate general
and administrative 4,308 2,708 Restatement, investigations and
remediation - 593
Operating income
(loss) (4,094 ) 4,874 Other income
(expense), net (2,287 ) (1,216 ) Income tax provision 532
2,277
Income (loss) from continuing
operations (6,913 ) 1,381 Loss from
discontinued operations, net of taxes - (4,876
)
Net loss $ (6,913 ) $
(3,495 )
Year-to-date Revenue and Operating Results
Net revenue in the first six months of fiscal 2015 decreased
$89.4 million, or 10.4%, to $768.3 million from $857.7 million in
fiscal 2014. The decrease in revenue was primarily the result of
decreased Staffing Services revenues of $75.9 million, or 9.5%, to
$723.1 million primarily driven by lower demand for both our
technical and to a lesser degree non-technical administrative and
light industrial ("A&I") skill-sets. The number of hours worked
by contingent workers decreased 7.2% in 2015 from 2014 and the
average bill rate also decreased 3.5%. Our fiscal 2014 top 20
customers on a comparable basis with the current year accounted for
approximately 80% of the overall decline in revenue. Furthermore,
revenue decreased partially due to our continued focus on reducing
business levels with customers where profitability or contract
terms are unfavorable.
The Other segment revenues decreased $13.5 million, or 23.1%, to
$45.2 million from $58.7 million in fiscal 2014. This decline is
primarily in information technology infrastructure service revenue
primarily from a large project in the first six months of 2014 and
non-recognition of revenue related to a customer experiencing
financial difficulty as well as lower telecommunication
infrastructure and security services as we exited the
telecommunications government solution business during the first
six months of 2014.
Loss from continuing operations in the first six months of 2015
of $15.7 million included special items related to impairments of
$5.4 million, foreign exchange loss of $1.2 million and numerous
other items of $3.4 million, including the settlement of a lawsuit,
shareholder and board related costs and restructuring charges.
Excluding the impact of these special items of $10.0 million, the
loss from continuing operations in 2015 would have been $5.7
million.
Staffing Services segment operating income in the first six
months of 2015 of $5.3 million included $1.2 million of special
items related to an impairment charge of $1.0 million and
restructuring costs of $0.2 million. Excluding the impact of these
special items, Staffing Services segment operating income would
have been $6.5 million.
Loss from continuing operations in the first six months of 2014
of $11.3 million included restatement, investigations and
remediation expenses of $3.3 million, restructuring costs of $1.6
million ($0.3 million reflected in corporate general and
administrative) and a non-cash loss related to foreign exchange
rates of $0.3 million. Excluding the impact of these special items,
loss from continuing operations in 2014 would have been $6.1
million.
Staffing Services segment operating income in the first six
months of 2014 of $3.6 million included $1.2 million of special
items related to restructuring costs. Excluding the impact of this
special item, Staffing Services segment operating income would have
been $4.8 million.
Condensed Consolidated Results of
Operations by Segment
Unaudited (in thousands)
Results of Operations by Segment (Six
Months 2015 vs. Six Months 2014)
Six months ended May 3, 2015 Six
months ended May 4, 2014 Total
StaffingServices
Other Total
StaffingServices
Other Revenue
Staffing services revenue $ 723,098 $ 723,098 $ - $ 799,002
$ 799,002 $ - Other revenue 45,157 -
45,157 58,706
- 58,706
Net revenue 768,255
723,098 45,157 857,708 799,002
58,706 Expenses Direct cost of staffing
services revenue 615,935 615,935 - 684,718 684,718 - Cost of other
revenue 39,514 - 39,514 48,199 - 48,199 Selling, administrative and
other operating costs 108,266 100,614 7,652 118,605 109,500 9,105
Restructuring costs 251 275 (24 ) 1,336 1,234 102 Impairment
charges 5,374 977 4,397
- - - Segment
operating income (loss) (1,085 ) 5,297 (6,382 ) 4,850 3,550 1,300
Corporate general and administrative 10,331 7,940 Restatement,
investigations and remediation - 3,261
Operating loss (11,416 ) (6,351
) Other income (expense), net (2,386 ) (1,626 ) Income tax
provision 1,911 3,324
Loss from
continuing operations (15,713 ) (11,301
) Loss from discontinued operations, net of taxes
(4,519 ) (9,268 )
Net loss $ (20,232
) $ (20,569 )
Note Regarding the Use of Non-GAAP Financial Measures
The Company has provided Non-GAAP financial information as
additional information for its consolidated income (loss) from
continuing operations as well as Staffing Services segment
operating income (loss). These measures are not in accordance with,
or an alternative for, generally accepted accounting principles
(“GAAP”) and may be different from Non-GAAP measures reported by
other companies. The Company believes that the presentation of
these Non-GAAP measures provides useful information to management
and investors regarding certain financial and business trends
relating to its financial condition and results of operations
because it permits evaluation of the results of the Company’s
continuing operations without the effect of special items that
management believes make it more difficult to understand and
evaluate the Company’s results of operations.
Elimination of Proforma Unrecognized Revenue Measures - We
sometimes provide services despite a customer arrangement not yet
being finalized, or continue to provide services under an expired
arrangement while a renewal arrangement is being finalized. GAAP
usually requires that services revenue be deferred until
arrangements are finalized or in some cases until cash is received.
We sometimes refer to “unrecognized revenue” to discuss income
related to services that have been provided in a given period, but
not yet recognized under GAAP. This non-GAAP financial information
is used by management and provided herein primarily to provide a
more complete understanding of our business results and trends.
In previous reporting periods, we disclosed in a tabular format
the impact of unrecognized revenue on our net revenue and operating
income as we believed that the amounts were material to our revenue
and operating results. In recent periods, the impact of
unrecognized revenue decreased as we concentrated on executing
customer arrangements in a timely manner and, therefore, we are
eliminating these tables.
The impact of unrecognized revenue in the second quarter of
fiscal 2015 and 2014 was a decrease of revenue and operating income
of $2.0 million and $1.8 million, respectively. The impact of
unrecognized revenue and operating income in the first six months
of 2015 and 2014 was an increase of revenue and operating income of
$0.3 million and a decrease to revenue and operating income of $0.8
million, respectively. If we believe that reporting the impact of
unrecognized revenue has a meaningful impact on revenue and
operating results in any particular period, we may include the
impact of such amounts within our narrative.
Liquidity
On May 3, 2015, the Company had available liquidity of $15.1
million and outstanding total debt of $137.7 million. The Company
is highly leveraged, and liquidity is being managed very
tightly.
In an effort to increase liquidity, management has determined it
would suspend common stock repurchases. Since the program’s
initiation, we repurchased $4.3 million of common stock. We believe
the Company needs to improve its liquidity to a level where there
are adequate cash reserves and funds to reinvest in the growth of
the business.
We also terminated our Short-Term Credit Facility. This facility
was no longer being used as it incurs fees and was generally
unavailable for working capital purposes due to 105%
collateralization requirements. We are in the process of finalizing
a foreign exchange agreement with a lender which will allow us to
initiate unsecured derivative transactions to hedge foreign
exchange exposure in our foreign businesses. We expect the
agreement to be finalized by the end of the month. We are also in
discussions with other financial institutions to sign similar
agreements.
Our liquidity agreement within our current Short-Term Financing
Program expires on December 18, 2015. We are currently actively
seeking replacement facilities that would be more responsive to our
seasonal and cyclical working capital needs and capital investment
requirements. We have received a non-binding proposal to provide a
one, two, or three year extension at our option. We are discussing
these options internally.
We are in the process of exiting non-core businesses that are
incurring losses and draining cash flows and we are also looking to
monetize several real estate assets via sale or sale/leaseback
arrangements or refinancing. In addition, we expect to favorably
resolve prior year tax filings with federal and state authorities.
We have significant tax benefits including outstanding tax
receivables of $16.7 million, which we expect to collect in the
next eight months, and federal net operating loss carryforwards of
$127.4 million and tax credits of $35.4 million.
Condensed Consolidated Statements of
Cash Flows
Unaudited (in thousands)
Six months ended May 3, 2015
May 4, 2014 Cash and cash equivalents, beginning of the
period $ 9,105 $ 9,847
Changes in operating assets and liabilities 5,773 33,097
Cash used in all other operating activities (6,277 )
(3,574 )
Net cash provided by (used in) operating
activities (504 )
29,523 Net cash provided by (used in)
investing activities (2,754 )
1,475 Net release of cash restricted as
collateral for borrowings 10,352 2,960 Net change in short-term
borrowings 1,494 (19,582 ) Purchases of common stock under
repurchase program (4,262 ) - Net cash used in all other financing
activities (8 ) (411 )
Net cash provided by
(used in) financing activities 7,576
(17,033 ) Effect of exchange
rate changes on cash and cash equivalents (1,959
) 204 Net cash used in discontinued
operations (4,056 ) (8,732 )
Net increase (decrease) in cash and cash
equivalents (1,697 )
5,437 Change in cash from discontinued
operations (211 ) (49
) Cash and cash equivalents, end of the period
$ 7,197 $ 15,235
Cash paid during the period: Interest $ 1,690 $ 1,885
Income taxes $ 634 $ 1,819
Condensed Consolidated Balance
Sheets
(in thousands, except share
amounts)
May 3, 2015 November 2, 2014
ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 7,197 $ 9,105 Restricted cash and short-term
investments 17,761 32,436 Trade accounts receivable, net of
allowances of $646 and $868, respectively 224,854 248,101
Recoverable income taxes 16,713 18,311 Prepaid insurance and other
current assets 23,268 26,255 Assets held for sale -
24,220
TOTAL CURRENT ASSETS
289,793 358,428 Prepaid insurance and other assets,
excluding current portion 45,696 39,600 Property, equipment and
software, net 24,789 26,304
TOTAL ASSETS $ 360,278 $
424,332 LIABILITIES AND STOCKHOLDERS'
EQUITY CURRENT LIABILITIES: Accrued compensation $
35,412 $ 41,182 Accounts payable 44,779 55,873 Accrued taxes other
than income taxes 14,835 17,099 Accrued insurance and other 36,206
39,104 Deferred revenue, net, current portion 2,059 3,491
Short-term borrowings, including current portion of long-term debt
130,949 129,417 Liabilities held for sale -
19,126
TOTAL CURRENT LIABILITIES
264,240 305,292 Accrued insurance and other,
excluding current portion 12,142 11,874 Income taxes payable,
excluding current portion 8,655 8,556 Long-term debt, excluding
current portion 6,732 7,216
TOTAL LIABILITIES 291,769 332,938
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 - 23,733,603 and 23,610,103,
respectively; Outstanding - 20,705,496 and 20,922,796,
respectively
2,373
2,361
Paid-in capital 74,338 73,194 Retained earnings 43,958 64,119
Accumulated other comprehensive loss (6,018 ) (6,400 ) Treasury
stock, at cost; 3,028,107 shares and 2,687,307 shares, respectively
(46,142 ) (41,880 )
TOTAL STOCKHOLDERS'
EQUITY 68,509 91,394
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $
360,278 $ 424,332
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150610005399/en/
Volt Information Sciences, Inc.Paul Tomkins,
212-704-7921voltinvest@volt.com
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