Volt Information Sciences Reports Fiscal 2016 Third Quarter Financial Results

NEW YORK--(BUSINESS WIRE)-- Volt Information Sciences, Inc. (“Volt” or “the Company”) (NYSE-MKT: VISI), a global provider of staffing services and information technology infrastructure services, today reported results for its third quarter ended July 31, 2016. Key elements include:

  • Third quarter net revenue of $330.5 million down 1.5% compared to the prior quarter and down 9.4% year-over-year
  • Third quarter loss from continuing operations of $4.6 million or $4.1 million excluding special items
  • Third quarter selling, administrative and other operating costs of $49.7 million lower by 3.3% compared to prior quarter and lower by 14.3% year-over-year due to headcount reductions and other initiatives to improve operating efficiencies
  • As of the end of the third quarter, the Company had $49.3 million of available liquidity for working capital requirements, compared to $27.0 million a year ago

Commenting on Volt’s third quarter performance, Michael Dean, President and CEO, said, “With continued measurable improvement this past quarter, I am pleased with our overall success in executing our turnaround plan. While our progress is evident across most aspects of the enterprise, our improving revenue performance provides the most compelling signal that our plan is taking hold. After normalizing for fewer work days during the fiscal third quarter, staffing segment revenue increased slightly on a sequential quarter basis. Importantly, we continue to add to our book of business with several recent new customer engagements. In addition, initiatives to improve our cost structure helped to reduce selling, administrative and other operating costs by 3% compared with the prior quarter and 14% compared to the third quarter last year. In fact, actions taken over the past year to streamline Volt’s cost structure will result in annual savings of approximately $13.0 million excluding Maintech. Based on our ongoing progress, I remain confident that our actions will lead to a significant improvement in our financial performance in the quarters and years ahead.”

Fiscal 2016 Third Quarter Results

Total revenue for the fiscal 2016 third quarter was $330.5 million, down $4.9 million, or 1.5% compared to total revenue of $335.4 million in the second quarter of fiscal 2016. Compared to the prior year period, total revenue decreased $34.2 million or 9.4% compared to $364.7 million in the third quarter of fiscal 2015.

Staffing Services segment revenue was $313.4 million, a $3.8 million or 1.2% decrease compared to $317.2 million in the second quarter of fiscal 2016. Compared to the prior year period, Staffing Services segment revenues declined $28.0 million, or 8.2% compared to Staffing Services revenues of $341.4 million in the third quarter of fiscal 2015. Other segment revenue was $17.1 million in the third quarter of fiscal 2016, compared to $18.2 million in the second quarter of fiscal 2016 and $23.3 million in the prior year period.

Net loss of $4.6 million in the third quarter of fiscal 2016 included $1.0 million of restructuring and severance costs, partially offset by $0.5 million related to the gain on the sale of real estate. Excluding the impact of these special items, net loss for the third quarter of 2016 would have been $4.1 million on a Non-GAAP basis.

Adjusted EBITDA, which is also a Non-GAAP measure, was $0.7 million in the fiscal 2016 third quarter. Adjusted EBITDA excludes the impact of interest expense, income tax expense, depreciation and amortization expense, other income/loss and share-based compensation expense. For a reconciliation of the GAAP and Non-GAAP financial results, please see the tables at the end of this press release.

Financing

In order to better align the covenants to the timing of certain liquidity events, in July 2016, the Company further amended its Financing Program with PNC Bank to reduce the minimum liquidity covenant level from $50.0 million to $35.0 million for the period beginning July 31, 2016 through the earlier of: 1) the date of the sale of the Company's subsidiary, Maintech Incorporated, if it is closed on or before September 30, 2016, and 2) October 30, 2016, thereafter it increases to $50.0 million.

On September 6, 2016, the Company amended its Financing Program to increase the facility limit from $150.0 million to $160.0 million under the expandable accordion feature in the program. The Company entered into this amendment to utilize the additional borrowing base provided by its current and potential growth in eligible accounts receivable balances.

Liquidity

As of July 31, 2016, the Company had $49.3 million of available liquidity for working capital requirements as compared to $27.0 million in the prior year period.

Conference Call and Webcast

A conference call and simultaneous webcast to discuss the fiscal 2016 third quarter financial results will be held today at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time. Volt’s President and CEO Michael Dean and CFO Paul Tomkins will host the conference call. Participants can listen in via webcast by visiting the Investor & Governance section of Volt’s website at www.volt.com. Please go to the website at least 15 minutes early to register, download and install any necessary audio software. The conference call can also be accessed by dialing 877-407-9039 (201-689-8470 for international callers) and reference the "Volt Information Sciences Earnings Conference Call."

Following the call, an audio replay will be available beginning Thursday, September 8, 2016 at 7:30 p.m. Eastern Time through Thursday, September 22, 2016 at 11:59 p.m. Eastern Time. To access the replay, dial 877-870-5176 (858-384-5517 for international callers) and enter the Conference ID # 13643965. A replay of the webcast will also be available for 90 days upon completion of the call, accessible through the Company's website at www.volt.com in the Investors & Governance section.

About Volt Information Sciences, Inc.

Volt Information Sciences, Inc. is a global provider of staffing services (traditional time and materials-based as well as project-based), managed service programs, technology outsourcing services and information technology infrastructure services. Our staffing services consist of workforce solutions that include providing contingent workers, personnel recruitment services, and managed services programs supporting primarily professional administration, technical, information technology, light-industrial and engineering positions. Our managed service programs consist of managing the procurement and on-boarding of contingent workers from multiple providers. Our technology outsourcing services provide pre and post production development, testing and customer support to companies in the mobile, gaming, and technology devices industries. In addition, we provide information technology infrastructure services which provide server, storage, network and desktop IT hardware maintenance, data center and network monitoring and operations. Our complementary businesses offer customized talent, technology and consulting solutions to a diverse client base. Volt services global industries including aerospace, automotive, banking and finance, consumer electronics, information technology, insurance, life sciences, manufacturing, media and entertainment, pharmaceutical, software, telecommunications, transportation, and utilities. For more information, visit www.volt.com. For more information on VMC, visit www.vmc.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., 1133 Avenue of the Americas, New York, New York 10036, 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.

 

Results of Operations

           
(in thousands, except per share data)
(Unaudited) Three Months Ended Nine Months Ended
July 31, 2016 May 1, 2016 August 2, 2015 July 31, 2016 August 2, 2015
 

Revenue:

Staffing services revenue $ 313,428 $ 317,247 $ 341,383 $ 939,356 $ 1,064,481
Other revenue   17,062     18,192     23,285     53,403     68,442  

Net revenue

330,490

335,439 364,668 992,759 1,132,923
 
Expenses:
Direct cost of staffing services revenue 266,684 267,826 287,554 798,682 900,909
Cost of other revenue 15,110 15,887 19,696 47,785 59,210
Selling, administrative and other operating costs 49,712 51,382 58,025 154,019 178,227
Restructuring and severance costs 970 840 1,867 4,571 3,093
Impairment charges - - 580 - 5,954
Gain on sale of building   -     (1,663 )   -     (1,663 )   -  

Total expenses

332,476 334,272 367,722 1,003,394 1,147,393
 

Operating income (loss)

(1,986 ) 1,167 (3,054 ) (10,635 ) (14,470 )
 
Interest income (expense), net (826 ) (862 ) (571 ) (2,346 ) (1,935 )
Foreign exchange gain (loss), net (1,003 ) (579 ) 1,010 (1,238 ) (153 )
Other income (expense), net   (402 )   (420 )   (178 )   (1,101 )   (37 )
Loss from continuing operations before income taxes (4,217 ) (694 ) (2,793 ) (15,320 ) (16,595 )
Income tax provision   393     1,091     1,351     2,037     3,262  
Loss from continuing operations (4,610 ) (1,785 ) (4,144 ) (17,357 ) (19,857 )
Loss from discontinued operations   -     -     -     -     (4,519 )
Net loss $ (4,610 ) $ (1,785 ) $ (4,144 ) $ (17,357 ) $ (24,376 )
 
Per share data:
Basic:
Loss from continuing operations $ (0.22 ) $ (0.09 ) $ (0.20 ) $ (0.83 ) $ (0.95 )
Loss from discontinued operations   -     -     -     -     (0.22 )
Net loss $ (0.22 ) $ (0.09 ) $ (0.20 ) $ (0.83 ) $ (1.17 )
Weighted average number of shares 20,846 20,814 20,741 20,824 20,821
 
Diluted:
Loss from continuing operations $ (0.22 ) $ (0.09 ) $ (0.20 ) $ (0.83 ) $ (0.95 )
Loss from discontinued operations   -     -     -     -     (0.22 )
Net loss $ (0.22 ) $ (0.09 ) $ (0.20 ) $ (0.83 ) $ (1.17 )
Weighted average number of shares 20,846 20,814 20,741 20,824 20,821
 
Segment data:
Revenue:
Staffing Services $ 313,428 $ 317,247 $ 341,383 $ 939,356 $ 1,064,481
Other Segment   17,062     18,192     23,285     53,403     68,442  
Net revenue $ 330,490   $ 335,439   $ 364,668   $ 992,759   $ 1,132,923  
 
Operating income (loss):
Staffing Services $ 6,109 $ 7,934 $ 8,161 $ 15,777 $ 22,128
Other Segment 465 224 1,327 318 (4,283 )
Corporate general & administrative (8,560 ) (8,654 ) (12,542 ) (28,393 ) (32,315 )
Gain on sale of building   -     1,663     -     1,663     -  
Operating income (loss) $ (1,986 ) $ 1,167   $ (3,054 ) $ (10,635 ) $ (14,470 )
 
Commencing in the first quarter of fiscal 2016, the Company changed its methodology for the allocation of costs to more effectively reflect and measure the individual businesses' financial and operational efficiency. Prior period segment results have been revised for these changes.
 
 

Condensed Consolidated Statements of Cash Flows

(in thousands)
(Unaudited)   Nine Months Ended
July 31, 2016     August 2, 2015
 

Cash and cash equivalents, beginning of the period

$ 10,188 $ 6,723
 
Cash used in all other operating activities (12,835 ) (7,017 )
Changes in operating assets and liabilities   11,520     23,123  
Net cash provided by (used in) operating activities   (1,315 )   16,106  
 
Proceeds from sale of property and equipment 36,795 389
Net cash used in all other investing activities   (14,188 )   (4,690 )
Net cash provided by (used in) investing activities   22,607     (4,301 )
 
Decrease in cash restricted as collateral for borrowings - 10,436
Net change in borrowings (8,000 ) (3,506 )
Repayment of long-term debt (7,295 ) (676 )
Purchases of common stock under repurchase program - (4,262 )
Net cash used in all other financing activities   (761 )   (242 )
Net cash provided by (used in) financing activities   (16,056 )   1,750  
 
Effect of exchange rate changes on cash and cash equivalents (2,538 ) (3,679 )
 
Net cash used in discontinued operations - (4,056 )
   
Net increase in cash and cash equivalents  

2,698

    5,820  
 
Change in cash from discontinued operations   -     (211 )
 
Cash and cash equivalents, end of the period $ 12,886   $ 12,332  

 

Cash paid during the period:

Interest

$ 2,436 $ 2,435
Income taxes $ 3,727 $ 1,638
 
 
Condensed Consolidated Balance Sheets

(in thousands, except share amounts)

    July 31, 2016   November 1, 2015
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 12,886 $ 10,188
Restricted cash and short-term investments 16,392 14,977
Trade accounts receivable, net of allowances of $718 and $960, respectively 179,088 198,385
Recoverable income taxes 17,244 16,633
Prepaid insurance and other current assets 13,396 15,865
Assets held for sale   19,680     22,943  
TOTAL CURRENT ASSETS 258,686 278,991
Other assets, excluding current portion 25,573 23,740
Property, equipment and software, net   27,783     24,095  
TOTAL ASSETS $ 312,042   $ 326,826  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued compensation $ 29,850 $ 29,548
Accounts payable 35,113 39,164
Accrued taxes other than income taxes 22,962 22,719
Accrued insurance and other 31,170 34,391
Short-term borrowings, including current portion of long-term debt 92,000 982
Income taxes payable - 1,658
Liabilities held for sale   5,571     7,345  
TOTAL CURRENT LIABILITIES 216,666 135,807
Accrued insurance and other, excluding current portion 15,304 13,699
Deferred gain on sale of real estate, excluding current portion 26,594 -
Income taxes payable, excluding current portion 6,647 6,516
Long-term debt, excluding current portion   -     106,313  
TOTAL LIABILITIES 265,211 262,335
 
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 - 23,738,003 and 23,738,003, respectively; Outstanding - 20,894,383 and 20,801,080, respectively 2,374 2,374
Paid-in capital 75,861 75,803
Retained earnings 18,692 38,034
Accumulated other comprehensive loss (9,104 ) (7,994 )
Treasury stock, at cost; 2,843,620 shares and 2,936,923 shares, respectively   (40,992 )   (43,726 )
TOTAL STOCKHOLDERS' EQUITY   46,831     64,491  

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 312,042   $ 326,826  
 
 

Unaudited Non-GAAP Statement of Operations and Reconciliations

(in thousands, except earnings per share)
 
  Three Months Ended July 31, 2016   Three Months Ended August 2, 2015
GAAP   Special Items   Ref   Non-GAAP GAAP   Special Items  

Ref

  Non-GAAP
 
Revenue:
Staffing services revenue $ 313,428 $ - $ 313,428 $ 341,383 $ - $ 341,383
Other revenue   17,062     -     17,062     23,285     -     23,285  
Net revenue 330,490 - 330,490 364,668 - 364,668
 
Expenses:
Direct cost of staffing services revenue 266,684 - 266,684 287,554 - 287,554
Cost of other revenue 15,110 - 15,110 19,696 - 19,696
Selling, administrative and other operating costs 49,712 486 (a) 50,198 58,025 (1,976 ) (c) 56,049
Restructuring and severance costs 970 (970 ) (b) - 1,867 (1,867 ) (d) -
Impairment charges   -     -     -     580     (580 ) (e)   -  
Total expenses 332,476 (484 ) 331,992 367,722 (4,423 ) 363,299
           
Operating income (loss) (1,986 ) 484 (1,502 ) (3,054 ) 4,423 1,369
 
Other income (expense), net:
Interest income (expense), net (826 ) - (826 ) (571 ) - (571 )
Foreign exchange gain (loss), net (1,003 ) - (1,003 ) 1,010 (1,010 ) (f) -
Other income (expense), net   (402 )   -     (402 )   (178 )   41   (g)   (137 )
Total other income (expense), net (2,231 ) - (2,231 ) 261 (969 ) (708 )
           
Income (loss) from continuing operations before income taxes (4,217 ) 484 (3,733 ) (2,793 ) 3,454 661
Income tax provision   393     -     393     1,351     -     1,351  
Income (loss) from continuing operations $ (4,610 ) $ 484   $ (4,126 ) $ (4,144 ) $ 3,454   $ (690 )
 
* Basic income (loss) from continuing operations $ (0.22 ) $ 0.02 $ (0.20 ) $ (0.20 ) $ 0.17 $ (0.03 )
* Diluted income (loss) from continuing operations $ (0.22 ) $ 0.02 $ (0.20 ) $ (0.20 ) $ 0.17 $ (0.03 )
 
Basic weighted average number of shares 20,846 20,846 20,846 20,741 20,741 20,741
Diluted weighted average number of shares 20,846 20,846 20,846 20,741 20,741 20,741
 
Special item adjustments consist of the following:
(a) Relates primarily to the amortization of the gain on the sale of the Orange, CA facility.
(b) Relates primarily to company-wide cost reduction plan.
(c) Relates primarily to stock-based compensation granted to our new Board of Directors of $1.5 million and $0.5 million of legal and other items.
(d) Relates primarily to severance charges associated with the departure of our former Chief Executive Officer ($1.5 million).
(e) Relates primarily to the impairment of capitalized internally developed software as well as an adjustment to the impairment of net assets.
(f) Relates primarily to non-cash foreign exchange gain or loss on our intercompany balances.
(g) Relates primarily to the sale of non-core operations.
 
* Earnings per share may not add in certain periods due to rounding.
 
 
Unaudited Reconciliation of GAAP Loss from Continuing Operations
to Adjusted EBITDA
(in thousands)
 
  Three Months Ended
July 31, 2016   August 2, 2015
 
GAAP loss from continuing operations $ (4,610 ) $ (4,144 )
Special items   484     3,454  
Non-GAAP loss from continuing operations (4,126 ) (690 )
 
Adjustments:
Depreciation and amortization 1,484 1,700
Share-based compensation expense 755 340
Other (income) loss, net (a) 2,231 708
Provision for income taxes   393     1,351  
Adjusted EBITDA $ 737   $ 3,409  
 
(a) Includes interest income (expense) and other income (expense), net.
 

Note Regarding the Use of Non-GAAP Financial Measures

The Company has provided certain non-GAAP financial information, which includes adjustments for special items, as additional information for its consolidated income (loss) from continuing operations, segment operating income (loss) and adjusted EBITDA. 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. Special items include impairments, restructuring and certain expenses or income not indicative of our current or future period performance and are more fully disclosed in the tables.

Investor Contacts:
Volt Information Sciences, Inc.
Paul Tomkins, 212-704-7921
voltinvest@volt.com
or
Addo Investor Relations
Lasse Glassen, 424-238-6249
lglassen@addoir.com

Source: Volt Information Sciences, Inc.