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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     For the quarterly period ended August 2, 2020
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
     For the transition period from          to          .
Commission File Number: 001-09232  
VOLT INFORMATION SCIENCES, INC.
(Exact name of registrant as specified in its charter)
New York13-5658129
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
2401 N. Glassell Street, Orange, California92865
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code:
(714) 921-8800

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.10VOLTNYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   x  Yes     ¨   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x   Yes   ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer x
Smaller reporting company x
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  ¨    No x

As of September 4, 2020, there were 21,702,078 shares of common stock outstanding.


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
Three Months EndedNine Months Ended
August 2, 2020July 28, 2019August 2, 2020July 28, 2019
NET REVENUE$185,941 $233,176 $610,982 $738,682 
Cost of services155,983 197,528 517,360 629,078 
GROSS MARGIN29,958 35,648 93,622 109,604 
 
EXPENSES
Selling, administrative and other operating costs
31,245 38,395 106,931 117,144 
Restructuring and severance costs
546 2,017 2,203 2,800 
Impairment charges
2,384 79 2,395 426 
OPERATING LOSS(4,217)(4,843)(17,907)(10,766)
OTHER INCOME (EXPENSE), NET
Interest income (expense), net
(467)(714)(1,788)(2,159)
Foreign exchange gain (loss), net
571 (151)(23)(252)
Other income (expense), net
(168)(184)(578)(589)
TOTAL OTHER INCOME (EXPENSE), NET(64)(1,049)(2,389)(3,000)
LOSS BEFORE INCOME TAXES(4,281)(5,892)(20,296)(13,766)
Income tax provision
556 165 774 671 
NET LOSS$(4,837)$(6,057)$(21,070)$(14,437)
PER SHARE DATA:
Basic and Diluted:
Net loss$(0.22)$(0.29)$(0.98)$(0.68)
Weighted average number of shares21,589 21,157 21,474 21,106 

See accompanying Notes to Condensed Consolidated Financial Statements.
1


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(unaudited)
Three Months EndedNine Months Ended
August 2, 2020July 28, 2019August 2, 2020July 28, 2019
NET LOSS$(4,837)$(6,057)$(21,070)$(14,437)
Other comprehensive income (loss):
Foreign currency translation adjustments net of taxes of $0 and $0, respectively
733 (565)495 (586)
COMPREHENSIVE LOSS$(4,104)$(6,622)$(20,575)$(15,023)

See accompanying Notes to Condensed Consolidated Financial Statements.

2


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
August 2, 2020November 3, 2019
(unaudited)
ASSETS
          CURRENT ASSETS:
                   Cash and cash equivalents$30,928 $28,672 
                   Restricted cash and short-term investments24,285 12,794 
                   Trade accounts receivable, net of allowances of $235 and $117, respectively
108,395 135,950 
   Other current assets7,067 7,252 
          TOTAL CURRENT ASSETS170,675 184,668 
          Property, equipment and software, net23,706 25,890 
          Right of use assets - operating leases40,146  
          Other assets, excluding current portion6,802 7,446 
TOTAL ASSETS$241,329 $218,004 
LIABILITIES AND STOCKHOLDERS EQUITY
          CURRENT LIABILITIES:
                   Accrued compensation$16,412 $21,507 
                   Accounts payable27,010 36,341 
                   Accrued taxes other than income taxes10,292 11,244 
                   Accrued insurance and other19,077 24,654 
                   Operating lease liabilities7,552  
                   Income taxes payable955 1,570 
          TOTAL CURRENT LIABILITIES81,298 95,316 
          Accrued payroll taxes and other, excluding current portion21,099 12,029 
          Operating lease liabilities, excluding current portion39,442  
          Deferred gain on sale of real estate, excluding current portion 20,270 
          Income taxes payable, excluding current portion289 289 
          Deferred income taxes11 17 
          Long-term debt, net58,930 53,894 
TOTAL LIABILITIES201,069 181,815 
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 shares; Outstanding - 21,702,078 shares and 21,367,821 shares, respectively
2,374 2,374 
          Paid-in capital79,686 77,688 
          Accumulated deficit(16,777)(10,917)
          Accumulated other comprehensive loss(6,306)(6,801)
          Treasury stock, at cost; 2,035,925 and 2,370,182 shares, respectively
(18,717)(26,155)
TOTAL STOCKHOLDERS EQUITY
40,260 36,189 
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
$241,329 $218,004 
See accompanying Notes to Condensed Consolidated Financial Statements.
3



VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except number of share data)
(unaudited)
Nine Months Ended August 2, 2020
Common Stock
$0.10 Par Value
Paid-in
Capital
(Accumulated Deficit) Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’ 
Equity
 SharesAmount
BALANCE AT NOVEMBER 3, 201923,738,003 $2,374 $77,688 $(10,917)$(6,801)$(26,155)$36,189 
Effect of new accounting principle
   22,216   22,216 
Net loss
   (10,808)  (10,808)
Share-based compensation
  511    511 
Issuance of common stock
  (114)(739) 846 (7)
Other comprehensive income
    364  364 
BALANCE AT FEBRUARY 2, 202023,738,003 $2,374 $78,085 $(248)$(6,437)$(25,309)$48,465 
Net loss   (5,425)  (5,425)
Share-based compensation  508    508 
Other comprehensive loss     (602) (602)
BALANCE AT MAY 3, 2020 23,738,003 $2,374 $78,593 $(5,673)$(7,039)$(25,309)$42,946 
Net loss   (4,837)  (4,837)
Share-based compensation  414    414 
Issuance of common stock  679 (6,267) 6,592 1,004 
Other comprehensive income    733  733 
BALANCE AT AUGUST 2, 202023,738,003 $2,374 $79,686 $(16,777)$(6,306)$(18,717)$40,260 

Nine Months Ended July 28, 2019
Common Stock
$0.10 Par Value
Paid-in
Capital
(Accumulated Deficit) Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’ 
Equity
 SharesAmount
BALANCE AT OCTOBER 28, 201823,738,003 $2,374 $79,057 $9,738 $(7,070)$(33,600)$50,499 
Effect of new accounting principle
   426   426 
Net loss
   (3,215)  (3,215)
Share-based compensation
  (113)   (113)
Issuance of common stock
  (35)(206) 241  
Other comprehensive income
    158  158 
BALANCE AT JANUARY 27, 201923,738,003 $2,374 $78,909 $6,743 $(6,912)$(33,359)$47,755 
Net loss   (5,165)  (5,165)
Share-based compensation  (95)   (95)
Issuance of common stock  (883)(2,234) 3,077 (40)
Other comprehensive loss     (179) (179)
BALANCE AT APRIL 28, 201923,738,003 $2,374 $77,931 $(656)$(7,091)$(30,282)$42,276 
Net loss   (6,057)  (6,057)
Share-based compensation  294    294 
Issuance of common stock  (942)(3,413) 4,080 (275)
Other comprehensive loss    (565) (565)
BALANCE AT JULY 28, 201923,738,003 $2,374 $77,283 $(10,126)$(7,656)$(26,202)$35,673 

See accompanying Notes to Condensed Consolidated Financial Statements.

4


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended
August 2, 2020July 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(21,070)$(14,437)
Adjustment to reconcile net loss to cash provided by operating activities:
Depreciation and amortization5,884 5,127 
Operating lease asset amortization6,024  
Allowance (release) of doubtful accounts and sales allowances4 (185)
Unrealized foreign currency exchange (gain) loss 796 (133)
Impairment charges2,395 426 
Amortization of gain on sale leaseback of property (1,458)
Loss (gain) on dispositions of property, equipment and software(287)13 
Share-based compensation1,433 86 
Change in operating assets and liabilities:
Trade accounts receivable 27,815 22,624 
Other assets 1,011 895 
Accounts payable (9,507)1,104 
Accrued expenses and other liabilities(868)(3,583)
Income taxes(548)(318)
Net cash provided by operating activities13,082 10,161 
CASH FLOWS USED IN INVESTING ACTIVITIES:
Sales of investments659 213 
Purchases of investments(469)(178)
Proceeds from sale of property, equipment, and software399 43 
Purchases of property, equipment, and software(3,925)(6,305)
Net cash used in investing activities (3,336)(6,227)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings(15,000)(20,000)
Draw-down on borrowings20,000 25,000 
Debt issuance costs(331)(621)
Withholding tax payment on vesting of stock awards(74)(316)
Net cash provided by financing activities 4,595 4,063 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(463)(633)
Net increase in cash, cash equivalents and restricted cash13,878 7,364 
Cash, cash equivalents and restricted cash, beginning of period38,444 36,544 
Cash, cash equivalents and restricted cash, end of period$52,322 $43,908 
Cash paid during the period:
Interest$1,858 $2,367 
Income taxes$1,445 $1,174 
Reconciliation of cash, cash equivalents, and restricted cash:
Current assets:
Cash and cash equivalents$30,928 $36,031 
Restricted cash included in Restricted cash and short-term investments21,394 7,877 
Cash, cash equivalents and restricted cash, end of period $52,322 $43,908 
See accompanying Notes to Condensed Consolidated Financial Statements.
5



VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
For the Fiscal Periods Ended August 2, 2020 and July 28, 2019
(Unaudited)

NOTE 1: Basis of Presentation

Basis of Presentation
The accompanying interim condensed consolidated financial statements of Volt Information Sciences, Inc. (“Volt” or the “Company”) have been prepared in conformity with generally accepted accounting principles ("GAAP"), consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended November 3, 2019. The Company makes estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates and changes in estimates are reflected in the period in which they become known. Accounting for certain expenses, including income taxes, is based on full year assumptions, and the financial statements reflect all normal adjustments that, in the opinion of management, are necessary for fair presentation of the interim periods presented. The interim information is unaudited and is prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), which provides for omission of certain information and footnote disclosures. This interim financial information should be read in conjunction with the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended November 3, 2019.

NOTE 2: Recently Issued Accounting Pronouncements

New Accounting Standards Not Yet Adopted by the Company

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company intends to apply ASU 2020-04 in the first quarter of fiscal 2021 and does not anticipate a significant impact on its consolidated financial statements upon adoption.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of Accounting Standards Codification (“ASC”) 820. ASU 2018-13 is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of ASU 2018-13. ASU 2018-13 is effective for the Company in the first quarter of fiscal 2021. The Company does not anticipate a significant impact on the consolidated financial statements upon adoption.
In June 2016, the FASB issued ASU 2016-13 (ASC Topic 326), as clarified in ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2018-19, amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. Under this model, an entity recognizes an allowance for expected credit losses based on historical experience, current conditions and forecasted information rather than the current methodology of delaying recognition of credit losses until it is probable a loss has been incurred. The amendments are effective for fiscal years beginning after December 15, 2022, which for the Company will be the first quarter of fiscal 2024. Although the impact upon adoption will depend on the financial instruments held by the Company at that time, the Company does not anticipate a significant impact on its consolidated financial statements based on the instruments currently held and its historical trend of bad debt expense relating to trade accounts receivable.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements and related disclosures.

Recently Adopted by the Company

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU 2018-07 expands the guidance in Topic 718 to include share-based payments for goods and services to non-employees and generally aligns it with the guidance for share-based payments to employees. ASU 2018-07 was effective for the Company in the first quarter of fiscal 2020 and the adoption of this guidance had no impact on the Company’s consolidated financial statements.
6


In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). This ASU requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This ASU was effective in the first quarter of fiscal 2020 resulting in the Company recording right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheet. The adoption of this standard did not have a material impact on the consolidated financial statements of operations and consolidated statements of cash flows. For the impact on the Company's consolidated financial statements, refer to Note 3 - Leases.
All other ASUs that became effective for Volt in the first nine months of fiscal 2020 were not applicable to the Company at this time and therefore, did not have any impact during the period.  

NOTE 3: Leases

The Company adopted ASC 842, Leases on November 4, 2019 using the modified transition method without retrospective application to comparative periods. The Company elected the package of three practical expedients allowed for under the transition guidance. Accordingly, the Company did not reassess: (1) whether any expired or existing contracts are/or contain leases; (2) the lease classification for any expired or existing leases; or (3) initial direct costs for any existing leases. The Company has also elected not to recognize ROU assets and lease liabilities for short-term leases that have a term of 12 months or less.
The Company’s material operating leases consist of branch locations, as well as corporate office space. Our leases have remaining terms of 1 - 11 years. The lease term is the minimum of the non-cancelable period of the lease or the lease term inclusive of reasonably certain renewal option periods. Volt determines if an arrangement meets the criteria of a lease at inception, at which time it also performs an analysis to determine whether the lease qualifies as operating or financing. The Company does not currently have any finance leases.
Upon adoption, the Company recorded approximately $47.2 million of ROU assets and $52.0 million of lease liabilities related to operating leases in the Condensed Consolidated Balance Sheet. At transition, the ROU asset was measured at the initial amount of the lease liability adjusted for any deferred rent and cease-use liabilities. The Company also recognized a $22.2 million cumulative-effect adjustment to retained earnings related to the deferred gain on the sale and leaseback of real estate. This gain was previously being amortized at approximately $0.5 million per quarter as an offset to rent expense in the Condensed Consolidated Statements of Operations. Since the Company has a full valuation allowance against its deferred tax assets, the impact is a reduction to our deferred tax assets and related valuation allowance, which resulted in no tax impact to the net change to equity.
Operating lease liabilities represent the present value of lease payments not yet paid. ROU assets represent Volt's right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepaid or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. As the rate implicit in the lease is not readily determinable, the Company used its incremental borrowing rates based on the information available at the lease commencement date in determining the present value of lease payments. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases.
The Company has elected the practical expedient to not separate non-lease components from the lease components to which they relate, and instead account for each as a single lease component, for all underlying asset classes. Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance, tax payments and other miscellaneous costs. The variable portion of lease payments is not included in the ROU assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.
Operating leases are included in Right of use assets - operating leases and Operating lease liabilities, current and long-term, in the Condensed Consolidated Balance Sheet. Lease expense for operating leases is recognized on a straight-line basis over the lease term, and is included in Selling, administrative and other operating costs in the Condensed Consolidated Statement of Operations. During the nine months ended August 2, 2020, cash paid for the amount that was included in the measurement of operating lease liabilities was $8.8 million and the ROU assets obtained in exchange for operating lease liabilities was $1.7 million.
7


The components of lease expense were as follows (in thousands):
Three Months Ended Nine Months Ended
August 2, 2020
Operating lease expense$2,827 $8,751 
Sublease income(394)(1,183)
Variable lease expense$213 $482 
Total (1)
$2,646 $8,050 
(1) The Company's short term lease expense was minimal.

Weighted average remaining lease terms and discount rates were as follows:
Nine Months Ended August 2, 2020
Weighted average remaining lease term (years)8.1
Weighted average discount rate6.3 %

Maturities of operating lease liabilities as of August 2, 2020 were as follows (in thousands):
Fiscal Year:Amount
Remainder of 2020$2,786 
20219,476 
20227,901 
20236,786 
20245,595 
Thereafter28,150 
Total future lease payments$60,694 
Less: Imputed interest13,700 
Total operating lease liabilities$46,994 

Maturities of operating leases accounted for under ASC 840 as of fiscal year-end 2019 were as follows (in thousands):
Fiscal Year:Amount
2020$11,782 
20219,287 
20227,457 
20236,328 
20245,486 
Thereafter28,422 
Total future lease payments$68,762 

NOTE 4: Revenue Recognition

Revenue Recognition

All of the Company’s revenue and trade receivables are generated from contracts with customers. Revenue is recognized when control of the promised services is transferred to the Company's customers at an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company's revenue is recorded net of any sales or other similar taxes collected from its customers.

8


Revenue Service Types

Staffing Services
Volt’s primary service is providing contingent (temporary) workers to its customers. These services are primarily provided through direct agreements with customers, and Volt provides these services using its employees and, in some cases, by subcontracting with other vendors of contingent workers. Volt’s costs in providing these services consist of the wages and benefits provided to the contingent workers as well as the recruiting costs, payroll department costs and other administrative costs.

Direct Placement Services
Direct placement services include providing qualified candidates to the Company's customers to hire on a permanent basis. Direct placement revenue is recognized net of a reserve for permanent placement candidates that do not remain with the customer through the contingency period, which is typically 60 days or less. This contingency is estimated based on historical data and recorded as a refund liability.

Managed Service Programs ("MSP")
The Company's MSP programs provide comprehensive solutions for delivery of contingent labor for assignment to customers, including supplier and worker sourcing, selecting, qualifying, on/off-boarding, time and expense recordation, reporting and approved invoicing and payment processing procedures. The Company’s fee for these MSP services is a fixed percentage of the staffing services spend that is managed through the program.

Disaggregation of Revenues

The following table presents our segment revenues disaggregated by service type (in thousands):
Three Months Ended August 2, 2020
SegmentTotalNorth American StaffingInternational StaffingNorth American
MSP
Corporate and OtherEliminations
Service Revenues:
Staffing Services$178,829 $153,642 $18,829 $6,313 $149 $(104)
Direct Placement Services2,587 1,069 935 583   
Managed Service Programs4,525  1,985 2,540   
$185,941 $154,711 $21,749 $9,436 $149 $(104)
Geographical Markets:
Domestic$163,397 $154,123 $ $9,358 $ $(84)
International22,544 588 21,749 78 149 (20)
$185,941 $154,711 $21,749 $9,436 $149 $(104)

Three Months Ended July 28, 2019
SegmentTotalNorth American StaffingInternational StaffingNorth American
MSP
Corporate and Other (1)Eliminations
Service Revenues:
Staffing Services$223,754 $191,575 $26,704 $5,664 $194 $(383)
Direct Placement Services3,679 2,066 1,137 697  (221)
Managed Service Programs4,081  887 3,194   
Call Center Services1,662    1,662  
$233,176 $193,641 $28,728 $9,555 $1,856 $(604)
Geographical Markets:
Domestic$203,266 $192,704 $ $9,478 $1,662 $(578)
International 29,910 937 28,728