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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
FORM 10-Q
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
        For the quarterly period ended January 30, 2022
    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 York
13-5658129
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)
2401 N. Glassell Street, Orange, California
92865
(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.   ☒  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).    ☒   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,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ☐Accelerated filerNon-accelerated filerSmaller reporting companyEmerging 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

As of March 11, 2022, there were 22,099,246 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 Ended
January 30, 2022January 31, 2021
NET REVENUE$226,928 $217,958 
Cost of services191,835 185,276 
GROSS MARGIN35,093 32,682 
 
EXPENSES
Selling, administrative and other operating costs
34,976 33,747 
Restructuring and severance costs
591 632 
Impairment charges23 31 
OPERATING LOSS(497)(1,728)
OTHER INCOME (EXPENSE), NET
Interest income (expense), net
(414)(477)
Foreign exchange gain (loss), net
(12)242 
Other income (expense), net
(143)(156)
TOTAL OTHER INCOME (EXPENSE), NET(569)(391)
LOSS BEFORE INCOME TAXES(1,066)(2,119)
Income tax provision
153 327 
NET LOSS$(1,219)$(2,446)
PER SHARE DATA:
Basic and Diluted:
Net loss$(0.06)$(0.11)
Weighted average number of shares22,158 21,793 

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 Ended
January 30, 2022January 31, 2021
NET LOSS$(1,219)$(2,446)
Other comprehensive income (loss):  
Foreign currency translation adjustments, net of taxes(862)931 
COMPREHENSIVE LOSS$(2,081)$(1,515)

See accompanying Notes to Condensed Consolidated Financial Statements.

2


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
January 30, 2022October 31, 2021
(unaudited)
ASSETS
          CURRENT ASSETS:
                   Cash and cash equivalents$54,864 $71,373 
                   Restricted cash and short-term investments11,587 8,729 
                   Trade accounts receivable, net of allowances of $148 and $137, respectively
129,303 127,211 
   Other current assets6,486 6,229 
          TOTAL CURRENT ASSETS202,240 213,542 
          Property, equipment and software, net16,253 17,482 
          Right-of-use assets - operating leases, net22,025 22,496 
          Other assets, excluding current portion6,537 6,584 
TOTAL ASSETS$247,055 $260,104 
LIABILITIES AND STOCKHOLDERS EQUITY
          CURRENT LIABILITIES:
                   Accrued compensation$21,811 $22,629 
                   Accounts payable36,649 36,544 
                   Accrued taxes other than income taxes32,486 31,112 
                   Accrued insurance and other17,573 16,298 
                   Operating lease liabilities7,052 6,775 
                   Income taxes payable1,012 956 
          TOTAL CURRENT LIABILITIES116,583 114,314 
          Accrued payroll taxes and other, excluding current portion8,877 21,832 
          Operating lease liabilities, excluding current portion32,434 33,558 
          Long-term debt, net59,384 59,307 
TOTAL LIABILITIES217,278 229,011 
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 - 22,099,246 shares
2,374 2,374 
          Paid-in capital80,827 80,062 
          Accumulated deficit(33,427)(32,208)
          Accumulated other comprehensive loss(7,111)(6,249)
          Treasury stock, at cost; 1,638,757 shares
(12,886)(12,886)
TOTAL STOCKHOLDERS EQUITY
29,777 31,093 
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
$247,055 $260,104 
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)
Three Months Ended January 30, 2022
Common Stock
$0.10 Par Value
Paid-in
Capital
Accumulated DeficitAccumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Stockholders’ 
Equity
 SharesAmount
BALANCE AT OCTOBER 31, 202123,738,003 $2,374 $80,062 $(32,208)$(6,249)$(12,886)$31,093 
Net loss— — — (1,219)— — (1,219)
Share-based compensation— — 765 — — — 765 
Other comprehensive loss— — — — (862)— (862)
BALANCE AT JANUARY 30, 202223,738,003 $2,374 $80,827 $(33,427)$(7,111)$(12,886)$29,777 

Three Months Ended January 31, 2021
Common Stock
$0.10 Par Value
Paid-in
Capital
Accumulated Deficit Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’ 
Equity
 SharesAmount
BALANCE AT NOVEMBER 1, 202023,738,003 $2,374 $79,937 $(29,793)$(6,458)$(18,186)$27,874 
Net loss— — — (2,446)— — (2,446)
Share-based compensation— — 226 — — — 226 
Issuance of common stock— — (21)(145)— 161 (5)
Other comprehensive income — — — — 931 — 931 
BALANCE AT JANUARY 31, 202123,738,003 $2,374 $80,142 $(32,384)$(5,527)$(18,025)$26,580 

See accompanying Notes to Condensed Consolidated Financial Statements.

4


VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Three Months Ended
January 30, 2022January 31, 2021
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss$(1,219)$(2,446)
Adjustment to reconcile net loss to cash used in operating activities:
Depreciation and amortization2,032 1,705 
Non-cash operating lease expense2,128 2,269 
Provision (release) of doubtful accounts and sales allowances92 (22)
Unrealized foreign currency exchange (gain) loss (240)629 
Impairment charges23 31 
Share-based compensation765 226 
Change in operating assets and liabilities:
Trade accounts receivable (2,143)(7,888)
Other assets (434)651 
Accounts payable 113 (5,519)
Accrued expenses and other liabilities(13,089)4,148 
Income taxes56 (283)
Net cash used in operating activities(11,916)(6,499)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Sales of investments428 115 
Purchases of investments(272)(125)
Proceeds from sale of property, equipment and software 6 
Purchases of property, equipment and software(797)(959)
Net cash used in investing activities (641)(963)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Debt issuance costs (161)
Other(16)(5)
Net cash used in financing activities (16)(166)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(597)(13)
Net decrease in cash, cash equivalents and restricted cash(13,170)(7,641)
Cash, cash equivalents and restricted cash, beginning of period76,609 56,433 
Cash, cash equivalents and restricted cash, end of period$63,439 $48,792 
Cash paid during the period:
Interest$422 $484 
Income taxes$85 $8 
Reconciliation of cash, cash equivalents, and restricted cash:
Current assets:
Cash and cash equivalents$54,864 $40,062 
Restricted cash included in Restricted cash and short-term investments8,575 8,730 
Cash, cash equivalents and restricted cash, end of period $63,439 $48,792 

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 January 30, 2022 and January 31, 2021
(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 October 31, 2021. 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 October 31, 2021.

NOTE 2: Recently Issued Accounting Pronouncements

New Accounting Standards Not Yet Adopted by the Company

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. This update requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy. This standard is effective for annual periods beginning after December 15, 2021. Early adoption is permitted. The amendments should be applied either (1) prospectively to all transactions within the scope of the amendments that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (2) retrospectively to those transactions. The Company is required to adopt the guidance in the first quarter of fiscal 2023. The Company does not anticipate a significant impact of these amendments on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Accounting Standards Codification (“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 for Smaller Reporting Companies are effective for fiscal years beginning after December 15, 2022, which for the Company will be the first quarter of fiscal 2024. The Company expects to early adopt this ASU in the first quarter of fiscal 2023. 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 October 2020, the FASB issued ASU 2020-10, Codification Improvements (“ASU 2020-10”). The amendments improve the ASC by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the Disclosure Section of the ASC. The amendments also clarify various provisions in the ASC so that the guidance can be applied more consistently. ASU 2020-10 was effective for the Company in the first quarter of fiscal 2022. The adoption of this guidance had no significant impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) (“ASU 2019-12”), which simplifies the accounting for income taxes. The ASU removes exceptions to the general principles for intraperiod tax allocation, the recognition of a deferred tax liability for equity method investments and the methodology for calculating income taxes in an interim period. It also improves consistent application of and simplification for other areas of Topic 740 by clarifying and amending existing guidance. ASU 2019-12 is effective for all entities for fiscal years beginning after December 15, 2020, including interim
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periods therein. This ASU was effective for the Company in the first quarter of fiscal 2022. The adoption of this guidance had no significant impact on the Company’s consolidated financial statements.

All other ASUs that became effective for Volt during the first quarter of fiscal 2022 were not applicable to the Company at this time and therefore, did not have any impact during the period.  

NOTE 3: Leases

The Company 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’s leases are primarily classified as operating and consist of branch locations, as well as corporate office space. The Company’s finance lease arrangements are immaterial. The leases have remaining terms of 1 - 9 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.
Operating leases are included in Right-of-use assets (“ROU”) - operating leases and Operating lease liabilities, current and long-term, in the Condensed Consolidated Balance Sheets. 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 Statements of Operations.
Components of Lease Expense (in thousands)Three Months Ended
January 30, 2022January 31, 2021
Operating lease expense$2,089 $2,269 
Sublease income(461)(402)
Variable lease expense370 314 
Total (1)(2)
$1,998 $2,181 
(1) The Companys short-term lease expense is immaterial.
(2) Lease expense included in restructuring is approximately $0.5 million and $0.6 million for the three months ended January 30, 2022 and January 31, 2021, respectively.

Three Months Ended
Supplemental Cash Flows Information (in thousands)January 30, 2022January 31, 2021
Cash paid for amounts included in the measurement of operating lease liabilities$2,428 $2,925 
Operating ROU assets obtained in exchange for operating lease liabilities$1,001 $737 

Three Months Ended
Weighted Average Remaining Lease Term and Discount RateJanuary 30, 2022January 31, 2021
Weighted average remaining lease term (years)7.27.8
Weighted average discount rate6.3 %6.3 %

Maturities of Lease Liabilities (in thousands)As of January 30, 2022
Fiscal Year:Amount
Remainder of 2022$7,037 
20237,881 
20246,259 
20255,536 
20264,281 
Thereafter18,704 
Total future lease payments$49,698 
Less: Imputed interest10,075 
Total lease liabilities$39,623 

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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.

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 January 30, 2022
SegmentTotalNorth American StaffingInternational StaffingNorth American
MSP
Corporate and OtherEliminations
Service Revenues:
Staffing Services$216,082 $188,666 $20,682 $6,729 $78 $(73)
Direct Placement Services4,868 2,530 1,876 462   
Managed Service Programs5,978  3,460 2,518   
$226,928 $191,196 $26,018 $9,709 $78 $(73)
Geographical Markets:
Domestic$199,856 $190,292 $ $9,637 $ $(73)
International27,072 904 26,018 72 78  
$226,928 $191,196 $26,018 $9,709 $78 $(73)

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Three Months Ended January 31, 2021
SegmentTotalNorth American StaffingInternational StaffingNorth American
MSP
Corporate and OtherEliminations
Service Revenues:
Staffing Services$209,269 $182,567 $19,995 $6,647 $119 $(59)
Direct Placement Services3,064 1,649 879 536   
Managed Service Programs5,625  3,139 2,486   
$217,958 $184,216 $24,013 $9,669 $119 $(59)
Geographical Markets:
Domestic$192,832 $183,297 $ $9,572 $ $(37)
International 25,126 919 24,013 97 119 (22)
$217,958 $184,216 $24,013 $9,669 $119 $(59)

Unsatisfied Performance Obligations

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which they will recognize revenue at the amount to which it has the right to invoice for services performed. Unsatisfied performance obligations for contracts not meeting the aforementioned criteria are immaterial.

Accounts Receivable, Contract Assets and Contract Liabilities

The Company records accounts receivable when its right to consideration becomes unconditional and maintains a sales allowance for any potential billing errors and service-related adjustments to the customer. As of January 30, 2022, the change in the reserve balance from October 31, 2021 was immaterial.

Contract assets primarily relate to the Company’s rights to consideration for services provided that are conditional on satisfaction of future performance obligations. Contract liabilities relate to payments that are received or due prior to the related performance obligations being satisfied. The Company does not have any material contract assets or long-term contract liabilities as of January 30, 2022 and October 31, 2021.

The Company may incur fulfillment costs after obtaining a contract related to the set up and implementation of customer-specific MSP programs. These costs are deferred and amortized over the expected period of benefit of the MSP services provided to the customer. Deferred fulfillment costs were immaterial as of January 30, 2022 and October 31, 2021.

Economic Factors

The Company’s operations are subject to variations in the economic condition and regulatory environment in their jurisdictions of operations. Adverse economic conditions may severely reduce the demand for the Company’s services and directly impact the revenue. In addition, the Company faces risks in complying with various legal requirements and unpredictable changes in both U.S. and foreign regulations which may have a financial impact on the business and operations.

The global spread of COVID-19, or coronavirus, created significant volatility, uncertainty and global macroeconomic disruption. Our business, results of operations and financial condition have been and may continue to be impacted by the ongoing coronavirus pandemic and related government actions, and any future adverse impacts could be material and are difficult to predict.

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NOTE 5: Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss for the three months ended January 30, 2022 were (in thousands):
Foreign Currency Translation
Accumulated other comprehensive loss at beginning of the period$(6,249)
Other comprehensive loss(862)
Accumulated other comprehensive loss at January 30, 2022$(7,111)

There were no taxes allocated to the components of Other comprehensive loss and no reclassifications from accumulated other comprehensive loss for the three months ended January 30, 2022 and January 31, 2021.

NOTE 6: Restricted Cash and Short-Term Investments

Restricted cash primarily includes amounts related to requirements under certain contracts with managed service program customers, for whom the Company manages the customers’ contingent staffing requirements, including processing of associate vendor billings into single, combined customer billings and distribution of payments to associate vendors on behalf of customers, as well as minimum cash deposits required to be maintained as collateral. Distribution of payments to associate vendors is generally made shortly after receipt of payment from customers, with undistributed amounts included in restricted cash and accounts payable between receipt and distribution of these amounts, where contractually required. At January 30, 2022 and October 31, 2021, restricted cash included $3.3 million and $3.8 million, respectively, restricted for payment to associate vendors, and $0.5 million, in both periods, restricted for other collateral accounts.

At January 30, 2022 and October 31, 2021, restricted cash also included $4.8 million and $0.9 million, respectively, restricted under the Company’s long-term accounts receivable securitization program (“DZ Financing Program”) with DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”). At January 30, 2022 and October 31, 2021, this cash was restricted as it supplemented collateral provided by accounts receivable towards the Company’s aggregate borrowing base usage of $82.1 million, inclusive of $60.0 million outstanding and $22.1 million in issued letters of credit.

Short-term investments were $3.0 million and $3.5 million at January 30, 2022 and October 31, 2021, respectively. These short-term investments consisted primarily of the fair value of deferred compensation investments corresponding to employees’ selections, primarily in mutual funds, based on quoted prices in active markets.

NOTE 7: Fair Value of Financial Instruments

In accordance with ASC 820, Fair Value Measurements, assets and liabilities recorded at fair value are measured and classified using a three-tier fair value hierarchy based on the observability of the inputs available in the market to measure fair value, as described below:

a.Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities.
b.Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
c.Level 3 measurements include significant unobservable inputs.
The carrying amounts of the Company’s financial instruments, which include cash, cash equivalents, restricted cash, accounts receivable and accounts payable, approximated their fair values due to the short-term nature of these instruments.

The Company holds mutual funds to satisfy its obligations under its employee deferred compensation plan, which is carried at fair value based on quoted market prices in active markets for identical assets (Level 1). These short-term investments were $3.0 million and $3.5 million at January 30, 2022 and October 31, 2021, respectively. The carrying amounts of long-term debt recorded in the Company’s Condensed Consolidated Balance Sheets were $59.4 million and $59.3 million at January 30, 2022 and October 31, 2021 respectively. These amounts were net of deferred financing fees and approximated its fair value, which is determinable based on the interest rates the Company believes it could obtain for borrowings with similar terms (Level 2).

Certain assets, such as goodwill, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. Upon a triggering event or evidence of impairment, the Company determines the fair value of these assets using Level 3 inputs, typically within a discounted cash flow model.

There have been no changes in the methodology used to measure fair value of the financial instruments as well as any transfer of Level 3 assets or liabilities during the three months ended January 30, 2022.
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NOTE 8: Income Taxes

The income tax provision reflects the geographic mix of earnings in various federal, state and foreign tax jurisdictions and their applicable rates resulting in a composite effective tax rate. The Company’s cumulative results for substantially all United States (“U.S.”) and certain non-U.S. jurisdictions for the most recent three-year period is a loss. Accordingly, a valuation allowance has been established for substantially all loss carryforwards and other net deferred tax assets for these jurisdictions, resulting in an effective tax rate that is significantly different than the statutory rate.

The Company adjusts its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate, consistent with ASC 270, Interim Reporting, and ASC 740-270, Income Taxes – Intra Period Tax Allocation. Jurisdictions with a projected loss for the full year where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. The Company’s future effective tax rates could be affected by earnings being different than anticipated in countries with differing statutory rates, increases in recorded valuation allowances of tax assets, or changes in tax laws.

The Company’s provision for income taxes primarily includes foreign jurisdictions and state taxes. The income tax provision in the first quarter of fiscal 2022 and 2021 were $0.2 million and $0.3 million, respectively, primarily related to locations outside of the United States. The Company’s quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items that occur within the periods presented.

NOTE 9: Debt

The Company’s primary sources of liquidity are cash flows generated from operations and proceeds from the DZ Financing Program. Both operating cash flows and borrowing capacity under this financing arrangement are directly related to the levels of accounts receivable generated by our business. The Company’s operating cash flows consist primarily of collections of customer receivables offset by payments for payroll and related items for the Company’s contingent staff and in-house employees; federal, foreign, state and local taxes; and trade payables. The Company’s level of borrowing capacity under the DZ Financing Program increases or decreases in tandem with any change in accounts receivable based on revenue fluctuations.

The Company manages its cash flow and related liquidity on a global basis. The weekly payroll payments inclusive of employment-related taxes and payments to vendors are approximately $16.0 - $17.0 million. The Company generally targets minimum global liquidity to be approximately 1.5 times its average weekly requirements. The Company also maintains minimum effective cash balances in foreign operations and uses a multi-currency netting and overdraft facility for its European entities to further minimize overseas cash requirements.

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) which, among other things, permits the deferral of the employer’s portion of social security tax payments between March 27, 2020 and December 31, 2020. As a result, as of October 31, 2021, $26.2 million of employer payroll tax payments were deferred with $13.2 million paid on January 3, 2022 and the remaining payable with the December 31, 2022 tax payment in January 2023.

The DZ Financing Program is fully collateralized by certain receivables of the Company that are sold to a wholly-owned, consolidated, bankruptcy-remote subsidiary. To finance the purchase of such receivables, that subsidiary may request that DZ Bank make loans from time-to-time to that subsidiary which are secured by liens on those receivables. The Maximum Facility Amount, as defined in the DZ Financing Program is $100.0 million.

In December 2020, the Company amended the DZ Financing Program, which was originally executed on January 25, 2018. The modifications to the agreement were to (1) extend the Amortization Date, as defined in the DZ Financing Program, from January 25, 2023 to January 25, 2024; (2) extend the Facility Maturity Date, as defined in the DZ Financing Program, from July 25, 2023 to July 25, 2024; (3) revise an existing covenant to maintain positive net income in any fiscal year ending after 2020 to any fiscal year ending after 2021; (4) replace the existing Tangible Net Worth (“TNW”) covenant requirement, as defined in the DZ Financing Program, to a minimum TNW of $20.0 million through the Company’s fiscal quarter ending on or about July 31, 2021 and $25.0 million in each quarter thereafter; and (5) revise the eligibility threshold for the receivables of a large North American Staffing customer from 5% of eligible receivables to 8%, which increased our overall availability under the Program by $1.0 - $3.0 million. All other terms and conditions of the DZ Financing Program remain substantially unchanged.

Loan advances may be made under the DZ Financing Program through January 25, 2024 and all loans will mature no later than July 25, 2024. Loans will accrue interest (i) with respect to loans that are funded through the issuance of commercial paper notes, at the commercial paper (“CP”) rate and (ii) otherwise, at a rate per annum equal to adjusted LIBOR. The CP rate will be based on the rates paid by the applicable lender on notes it issues to fund related loans. Adjusted LIBOR is based on LIBOR for the applicable interest period and the rate prescribed by the Board of Governors of the Federal Reserve System for determining the reserve requirements with
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respect to Eurocurrency funding. If an event of default occurs, all loans shall bear interest at a rate per annum equal to the prime rate (the federal funds rate plus 3%) plus 2.5%.

The DZ Financing Program also includes a letter of credit sub-facility with a sub-limit of $35.0 million. As of January 30, 2022, the letter of credit participation was $22.1 million inclusive of $20.9 million for the Company’s casualty insurance program and $1.2 million for the security deposit required under certain real estate lease agreements.

The DZ Financing Program contains customary representations and warranties as well as affirmative and negative covenants. The agreement also contains customary default, indemnification and termination provisions. The DZ Financing Program is not an off-balance sheet arrangement, as the bankruptcy-remote subsidiary is a 100%-owned consolidated subsidiary of the Company.

The Company is subject to certain financial and portfolio performance covenants under the DZ Financing Program, including (1) a minimum TNW, as defined under the DZ Financing Program, of at least $25.0 million in each quarter; (2) positive net income in any fiscal year ending after 2021; (3) maximum debt to tangible net worth ratio of 3:1; and (4) a minimum of $15.0 million in liquid assets, as defined under the DZ Financing Program. At January 30, 2022, the Company was in compliance with all debt covenants. At January 30, 2022, there was $2.7 million of borrowing availability, as defined under the DZ Financing Program.

At January 30, 2022 and January 31, 2021, the Company had outstanding borrowings under the DZ Financing Program of $60.0 million, with a weighted average annual interest rate of 1.9% during the first quarter of both fiscal 2022 and fiscal 2021.

Long-term debt consists of the following (in thousands):
 January 30, 2022October 31, 2021
Financing programs $60,000 $60,000 
Less:
Deferred financing fees616 693 
Total long-term debt, net$59,384 $59,307 

NOTE 10: Earnings (Loss) Per Share

Basic and diluted net loss per share are calculated as follows (in thousands, except per share amounts):
Three Months Ended
January 30, 2022January 31, 2021
Numerator
Net loss$(1,219)$(2,446)
Denominator
Basic weighted average number of shares22,158 21,793 
Diluted weighted average number of shares
22,158 21,793 
Net loss per share:
Basic$(0.06)$(0.11)
Diluted$(0.06)$(0.11)

The diluted earnings per share for the three months ended January 30, 2022 did not include the effect of potentially dilutive outstanding shares comprised of 1,101,790 restricted stock units (“RSUs”), 318,204 stock options and 493,604 performance stock units (“PSUs”) because the effect would have been anti-dilutive.

The diluted earnings per share for the three months ended January 31, 2021 did not include the effect of potentially dilutive outstanding shares comprised of 958,961 RSUs, 331,944 stock options and 194,417 PSUs because the effect would have been anti-dilutive.

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NOTE 11: Share-Based Compensation Plans

For the three months ended January 30, 2022 and January 31, 2021, the Company recognized share-based compensation expense of $0.8 million and $0.2 million, respectively. These expenses are included in Selling, administrative and other operating costs in the Company’s Condensed Consolidated Statements of Operations.
2021 Equity Incentive Plan
On April 20, 2021, the stockholders of the Company approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan permits the granting of (1) stock options, including incentive stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units, (5) performance awards and (6) other awards valued in whole or in part by reference to or otherwise based on our common stock (as defined in the 2021 Plan). Subject to adjustment as provided in the 2021 Plan, up to an aggregate of 3,700,000 shares of the Company’s common stock will be available for awards under the 2021 Plan, plus any shares under the Company’s 2019 and 2015 Equity Incentive Plans that rollover, are forfeited or otherwise become available for awards under the 2021 Plan.
Fiscal 2021 Awards

During the third quarter of fiscal 2021, the Company granted PSUs to certain executives, RSUs to certain employees including executive management and RSUs to the Board of Directors.

The PSUs are eligible to vest in three equal tranches at the end of each performance period. Vesting of the PSUs is dependent on the achievement of the adjusted Earnings Before Interest, Taxes, Depreciation and Amortization margin percentage goals based on adjusted revenues at the end of each fiscal year of the one-year, two-year and three-year performance periods and provided that the employees remain employed with the Company on the applicable vesting date. The payout percentages can range from 0% to 150%. The employee RSUs are time-vested and vest in equal annual tranches over three years, provided that the employees remain employed with the Company on the applicable vesting date. The Board of Director RSUs vest one year from the grant date provided that the director provides continued service through the vesting date. The grant date fair value for the PSUs and RSUs is measured using the closing stock price on the grant date. The PSUs and RSUs had a total grant date fair value of approximately $1.6 million and $2.4 million, respectively.

Summary of Equity Awards
The following tables summarize the activities related to the Company’s share-based equity awards for the three months ended January 30, 2022:
Performance Share UnitsNumber ofWeighted Average
SharesGrant Date Fair Value
Outstanding at October 31, 2021499,447 $4.17
Forfeited(5,843)$4.04
Outstanding at January 30, 2022493,604 $4.17

Restricted Stock UnitsNumber ofWeighted Average
SharesGrant Date Fair Value
Outstanding at October 31, 2021 and January 30, 20221,101,790 $3.01

Stock OptionsNumber of
Shares
Weighted Average Exercise PriceWeighted Average Contractual Life (in years)Aggregate Intrinsic Value (in thousands)
Outstanding at October 31, 2021318,204 $5.715.25$
   
Outstanding and Exercisable at January 30, 2022318,204 $5.715.00$

For the three months ended January 30, 2022, there was no exercise of stock options. As of January 30, 2022, total unrecognized compensation expense of $2.7 million related to PSUs and RSUs will be recognized over the remaining weighted average vesting period of 1.8 years of which $1.6 million, $0.8 million and $0.3 million are expected to be recognized in fiscal 2022, 2023 and 2024, respectively.

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NOTE 12: Restructuring and Severance Charges

The Company incurred total restructuring and severance costs of $0.6 million in both the first quarter of fiscal 2022 and 2021.
As part of its continued efforts to reduce costs, in the first quarter of fiscal 2022, the Company recorded $0.5 million of restructuring costs related to ongoing costs of facilities exited in fiscal 2020 and $0.1 million in severance costs. In the first quarter of fiscal 2021, the Company recorded severance costs of $0.3 million primarily resulting from the elimination of certain positions and $0.6 million related to on-going costs of facilities exited in fiscal 2020, partially offset by a $0.3 million lease termination gain.

Accrued restructuring and severance costs are included in Accrued compensation and Accrued insurance and other in the Condensed Consolidated Balance Sheets. Activity for the first three months of fiscal 2022 is summarized as follows (in thousands):
January 30, 2022
Balance, beginning of year$549 
Charged to expense591 
Cash payments(904)
Ending Balance $236 
The remaining balance as of January 30, 2022 of $0.2 million, was primarily related to severance costs in the International Staffing and North American MSP segments.

NOTE 13: Commitments and Contingencies

Legal Proceedings
The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company’s loss contingencies not discussed elsewhere consist primarily of claims and legal actions arising in the normal course of business related to contingent worker employment matters in the staffing services segments. These matters are at varying stages of investigation, arbitration or adjudication. The Company has accrued for losses on individual matters that are both probable and reasonably estimable.

Estimates are based on currently available information and assumptions. Significant judgment is required in both the determination of probability and the determination of whether a matter is reasonably estimable. The Company’s estimates may change and actual expenses could differ in the future as additional information becomes available.

NOTE 14: Segment Data

The Company reports segment data in accordance with the provisions of ASC 280, Segment Reporting, aligning with the way the Company evaluates its business performance and manages its operations. The current reportable segments are (i) North American Staffing, (ii) International Staffing and (iii) North American MSP. The non-reportable businesses are combined and disclosed with corporate services under the category Corporate and Other.

Segment operating income (loss) is comprised of segment net revenue less cost of services, selling, administrative and other operating costs, restructuring and severance costs, and impairment charges. The Company allocates to the segments all operating costs except for costs not directly related to the operating activities such as corporate-wide general and administrative costs. These costs are not allocated because doing so would not enhance the understanding of segment operating performance and are not used by management to measure segment performance.

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Financial data concerning the Company’s segment revenue and operating income (loss) as well as results from Corporate and Other are summarized in the following tables (in thousands):
Three Months Ended January 30, 2022
TotalNorth American Staffing International StaffingNorth American MSPCorporate and Other Eliminations
Net revenue$226,928 $191,196 $26,018 $9,709 $78 $(73)
Cost of services191,835 163,145 20,800 7,921 42 (73)
Gross margin35,093 28,051 5,218 1,788 36  
Selling, administrative and other operating costs34,976 21,409 4,280 815 8,472  
Restructuring and severance costs591 67 70  454  
Impairment charge23    23  
Operating income (loss)(497)6,575 868 973 (8,913) 
Other income (expense), net(569)
Income tax provision153 
Net loss$(1,219)
Three Months Ended January 31, 2021
TotalNorth American Staffing International StaffingNorth American MSPCorporate and OtherEliminations
Net revenue$217,958 $184,216 $24,013 $9,669 $119 $(59)
Cost of services185,276 157,636 19,851 7,784 64 (59)
Gross margin32,682 26,580 4,162 1,885 55  
Selling, administrative and other operating costs33,747 20,646 3,788 1,353 7,960  
Restructuring and severance costs632 (241)(8) 881  
Impairment charge31    31  
Operating income (loss)(1,728)6,175 382 532 (8,817) 
Other income (expense), net(391)
Income tax provision327 
Net loss$(2,446)

NOTE 15: Subsequent Events

On February 4, 2022, the Company reported that its Chief Financial Officer, Herbert Mueller, is currently unable to perform his duties due to a medical illness and will temporarily step away from his role as Chief Financial Officer. In Mr. Mueller’s absence, the Company’s former Chief Financial Officer, Paul Tomkins, will serve as Interim Chief Financial Officer, effective February 4, 2022, and will assume the day-to-day responsibilities of such role until further notice.

The Company and Vega Consulting, Inc. (“Vega”), an affiliate of ACS Solutions, a global provider of information technology solutions and services, announced on March 14, 2022, that Volt and Vega entered into a definitive merger agreement under which Volt will be acquired for $6.00 per share in cash. This per share purchase price represents a premium of 99% to the Company’s closing stock price on March 11, 2022. Vega will commence a tender offer no later than March 25, 2022, to acquire all outstanding shares of Volt for $6.00 per share in cash. The merger agreement was approved by Volt’s board of directors, which recommends that Volt stockholders tender their shares in the tender offer. Additional information related to the Merger Agreement can be found within the Form 8-K filed by the Company on March 14, 2022.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s discussion and analysis (“MD&A”) of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes to enhance the understanding of our results of operations, financial condition and cash flows. This MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that involve expectations, plans or intentions (such as those relating to future business, future results of operations or financial condition, including with respect to the anticipated effects of COVID-19 and related government actions). You can identify these forward-looking statements by words such as “may,” “will,” “would,” “should,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. This MD&A should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021, as filed with the SEC on January 12, 2022 (the “2021 Form 10-K”). References in this document to “Volt,” “Company,” “we,” “us” and “our” mean Volt Information Sciences, Inc. and our consolidated subsidiaries, unless the context requires otherwise. The statements below should also be read in conjunction with the description of the risks and uncertainties set forth from time to time in our reports and other filings made with the SEC, including under Part I, “Item 1A. Risk Factors” of the 2021 Form 10-K and Part II, “Item 1A. Risk Factors” of this report. We do not intend, and undertake no obligation except as required by law, to update any of our forward-looking statements after the date of this report to reflect actual results or future events or circumstances. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Note Regarding the Use of Non-GAAP Financial Measures

We have provided certain Non-GAAP financial information, which includes adjustments for special items and certain line items on a constant currency basis, as additional information for segment revenue, our consolidated net income (loss) and segment operating income (loss). These measures are not in accordance with, or an alternative for, measures prepared in accordance with generally accepted accounting principles (“GAAP”) and may be different from Non-GAAP measures reported by other companies. Our Non-GAAP measures are generally presented on a constant currency basis, and exclude (i) the impact of businesses sold or exited, (ii) the impact from the migration of certain clients from a traditional staffing model to a managed service model (“MSP transitions”) as we believe that the difference in revenue recognition accounting under each model of the MSP transitions could be misleading on a comparative period basis and (iii) the elimination of special items. Special items generally include impairments, restructuring and severance costs, as well as certain income or expenses which the Company does not consider indicative of the current and future period performance. We believe that the use of Non-GAAP measures provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations because they permit evaluation of the results of operations without the effect of currency fluctuations or special items that management believes make it more difficult to understand and evaluate our results of operations.

Segments

Our reportable segments are (i) North American Staffing, (ii) International Staffing and (iii) North American MSP. All other business activities that do not meet the criteria to be reportable segments are aggregated with corporate services under the category Corporate and Other. Our reportable segments have been determined in accordance with our internal management structure, which is based on operating activities. We evaluate business performance based upon several metrics, primarily using revenue and segment operating income as the primary financial measures. We believe segment operating income provides management and investors a measure to analyze operating performance of each business segment against historical and competitors’ data, although historical results, including operating income, may not be indicative of future results as operating income is highly contingent on many factors including the state of the economy, competitive conditions and customer preferences.

We allocate all support-related costs to the operating segments except for costs not directly relating to our operating activities such as corporate-wide general and administrative costs. These costs are not allocated to individual operating segments because we believe that doing so would not enhance the understanding of segment operating performance and such costs are not used by management to measure segment performance.

We report our segment information in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 280, Segment Reporting (“ASC 280”), aligning with the way the Company evaluates its business performance and manages its operations.

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Overview

We are a global provider of staffing services (traditional time and materials-based as well as project-based). Our staffing services consist of workforce solutions that include providing contingent workers, personnel recruitment services and managed staffing services programs supporting primarily administrative and light industrial (commercial) as well as technical, information technology and engineering (professional) positions. Our managed service programs (“MSP”) involves managing the procurement and on-boarding of contingent workers from multiple providers.

We operate in approximately 65 of our own locations and have an on-site presence in over 60 customer locations. Approximately 88% of our revenue is generated in the United States. Our principal international markets include Europe, Asia Pacific and Canada locations. The industry is highly fragmented and very competitive in all of the markets we serve.

Environmental, Social and Governance (“ESG”) Matters

The Company recognizes the importance of ESG matters, with a specific focus on Human Capital Management, as integral to creating a sustainable foundation for our long-term business strategy. While the Nominating and Corporate Governance Committee of the Board of Directors holds primary responsibility for ESG oversight and guidance, our entire Board of Directors, composed of independent directors, is fully engaged in these efforts.

Human Capital Management

Volt operates on the fundamental philosophy that people are our most valuable asset as every person who works for us has the potential to impact our success as well as the success of our clients. As a staffing company, identifying quality talent is at the core of everything we do and our success is dependent upon our ability to attract, develop and retain highly qualified employees, both in-house and for our clients. The Company’s core values of integrity, customer centric, ownership, innovation, empowerment, collaborative change and teamwork establish the foundation on which the culture is built and represent the key expectations we have of our employees. We believe our culture and commitment to our employees attract and retain our qualified talent, while simultaneously providing significant value to our Company and its shareholders.

Demographics

As of January 30, 2022, we employed approximately 14,600 people, including approximately 13,500 who were on contingent staffing assignments with our clients, and the remainder as full-time in-house employees. Approximately 70% of the full-time in-house employees are located in North America and the remaining are within Asia Pacific and Europe. The workers on contingent staffing assignments are on our payroll for the length of their assignment with the client.

Diversity and Inclusion

Volt values building diverse teams, embracing different perspectives and fostering an inclusive, empowering work environment for our employees and clients. We have a long-standing commitment to equal employment opportunity as evidenced by the Company’s Equal Employment Opportunity policy. Of our North American in-house employee population, approximately 71% are women and approximately 48% have self-identified as Hispanic or Latino, Native American, Pacific Islander, Asian, Black or African American, or of two or more races. As part of Volt’s commitment to continued enhancements in this area, we launched our Expert Momentum Diversity and Inclusion Program. This program involved the creation of a task force made up of a group of employees from across the organization. The program has established initiatives to strengthen the promotion of workplace diversity for our employees and clients, to create a collaborative environment that promotes authenticity and a culture that celebrates our differences, and embraces a collaborative environment with unique experiences and diverse perspectives. The program’s task force will enhance company-wide engagement on diversity and inclusion, provide education opportunities for our employees, help identify areas for improvement and monitor progress against these initiatives.

Compensation and Benefits

Critical to our success is identifying, recruiting, retaining, and incentivizing our existing and future employees. We strive to attract and retain the most talented employees in the staffing industry by offering competitive compensation and benefits. Our pay-for-performance compensation philosophy is based on rewarding each employee’s individual contributions and striving to achieve equal pay for equal work regardless of gender, race or ethnicity. We use a combination of fixed and variable pay including base salary, bonus, commissions and merit increases which vary across the business. In addition, as part of our long-term incentive plan for executives and certain employees, we provide share-based compensation to foster our pay-for-performance culture and to attract, retain and motivate our key leaders.

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As the success of our business is fundamentally connected to the well-being of our people, we offer benefits that support their physical, financial and emotional well-being. We provide our employees with access to flexible and convenient medical programs intended to meet their needs and the needs of their families. In addition to standard medical coverage, we offer eligible employees dental and vision coverage, health savings and flexible spending accounts, paid time off, employee assistance programs, voluntary short-term and long-term disability insurance and term life insurance. Additionally, we offer a 401(k) Savings Plan and Deferred Compensation Plan to certain employees. Our benefits vary by location and are designed to meet or exceed local laws and to be competitive in the marketplace.

In response to the COVID-19 pandemic, government legislation and key authorities, we implemented changes that we determined were in the best interest of our employees, as well as the communities in which we operate. This included having the majority of our employees work from home for several months, while implementing additional safety measures for employees continuing critical on-site work. We continue to embrace a flexible working arrangement for a majority of our in-house employees, as well as a portion of our contingent workforce where we continue to provide key services to customers remotely.

Professional Development and Training

We believe a key factor in employee retention is training and professional development for our talent. We have training programs across all levels of the Company to meet the needs of various roles, specialized skill sets and departments across the Company. All field associates receive Volt’s General Safety Orientation prior to assignment and site-specific job task training from our clients. Volt offers the Federal Ten Hour and other specialty safety programs to key employees and clients as a value-add feature of our services. Volt is committed to the security and confidentiality of our employees’ personal information and employs software tools and periodic employee training programs to promote security and information protection at all levels. Additionally, in the second quarter of fiscal 2021, we invested in an online educational platform to upskill our field associates across North America. This platform provides significant benefit and support to our employees in furthering their education and achieving their personal and professional goals, while at the same time cultivating a better-skilled pool of talent for our clients.

We utilize certain employee turnover rates and productivity metrics in assessing our employee programs to ensure that they are structured to instill high levels of in-house employee tenure, low levels of voluntary turnover and the optimization of productivity and performance across our entire workforce. Additionally, we have implemented a new performance evaluation program which adopts a modern approach to valuing and strengthening individual performance through on-going interactive progress assessments related to established goals and objectives.

Communication and Engagement

We strongly believe that Volt’s success depends on employees understanding how their work contributes to the Company’s overall strategy. To this end, we communicate with our workforce through a variety of channels and encourage open and direct communication, including: (i) quarterly company-wide CEO update calls; (ii) regular company-wide calls with executives; (iii) frequent corporate email communications; and (iv) employee engagement surveys.

Commitment to Values and Ethics through Governance

Along with our core values, we act in accordance with our Code of Business Conduct and Ethics (“Code of Conduct”), which sets forth expectations and guidance for employees to make appropriate decisions. Our Code of Conduct covers topics such as anti-corruption, discrimination, harassment, privacy, appropriate use of company assets, protecting confidential information and reporting Code of Conduct violations. The Code of Conduct reflects our commitment to operating in a fair, honest, responsible and ethical manner and also provides direction for reporting complaints in the event of alleged violations of our policies (including through an anonymous hotline). Our executive officers and supervisors maintain “open door” policies and any form of retaliation is strictly prohibited. We take all reports of suspected violations of the Code of Conduct and unethical behavior seriously and will take appropriate actions to correct the situation.

Environmental

As a global provider of staffing services, Volt does not produce or manufacture any products or materials and therefore our environmental impact has been relatively small. Nevertheless, we understand that certain areas of our business and operations have an impact on the environment and we are dedicated to promoting internal sustainability initiatives and keeping our ecological footprint to a minimum. In addition to certain on-going internal initiatives, including office waste reduction practices such as printing less and recycling furniture and electronics, we were able to take advantage of more impactful opportunities using actions implemented during the COVID-19 pandemic. During fiscal 2020, we were able to quickly shift to a fully remote in-house workforce and we continue to have the majority of our in-house employees work remotely thereby reducing the environmental impact of commuting and office energy consumption. This work model has allowed us to further decrease our carbon footprint by exiting and consolidating certain
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offices. We have also been able to reduce certain business travel by using virtual and collaborative tools whenever possible, further limiting our ecological impact. Volt is committed to enhancing its environmental protection measures and continuing to promote an eco-friendly culture both internally and in the communities it serves.

COVID-19 and Our Response

The global spread of the COVID-19 pandemic created significant volatility, uncertainty and global macroeconomic disruption. Our business experienced significant changes in revenue trends at the mid-point of our second quarter of fiscal 2020 through the beginning of our third quarter of fiscal 2020, as a number of countries and U.S. federal, state and local governments issued varying levels of stay-at-home orders and other restrictions and mandates. Our business was largely converted to a remote in-house workforce and remained open as we provided key services to essential businesses, both remotely and onsite at our customers’ locations. Beginning in the second half of fiscal 2020, revenue steadily increased as a result of a combination of existing customers returning to work, expanding business with existing customers and winning new customers.

We continue to operate on a hybrid-model with certain locations fully staffed and others opening on a limited voluntary basis. Our COVID-19 Incident Response Team continues to monitor the most up-to-date developments and safety standards from the Centers for Disease Control and Prevention, World Health Organization, Occupational Safety and Health Administration and other key authorities to determine an appropriate response for our employees and clients. While this team is continuing to monitor COVID-19 developments globally, we remain focused on the regulations and vaccine requirements in the U.S. to ensure we are complying with all relevant regulations. We are also monitoring developments related to vaccine mandates from certain customers.

We expect the global business environment will continue to operate in various stages of economic turbulence. We are encouraged by the increase in order activity and demand throughout the Company, however, the pace of such increase may be impacted if a resurgence in COVID-19 infections leads to additional disruptions, government mandates or increased lack of available talent to match our customers’ demands.

For additional discussion on the uncertainties and business risks associated with COVID-19, refer to Part I, “Item 1A. Risk Factors” in the 2021 Form 10-K.

Critical Accounting Estimates
Casualty Insurance Program

We purchase workers’ compensation insurance through mandated participation in certain state funds and the experience-rated premiums in these state plans relieve us of any additional liability. Liability for workers’ compensation in all other states as well as automobile and general liability is insured under a paid loss deductible casualty insurance program for losses exceeding specified deductible levels and we are financially responsible for losses below the specified deductible limits. The casualty program is secured by a letter of credit against our financing arrangement (“DZ Financing Program”) with DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) of $20.9 million as of January 30, 2022.

We recognize expenses and establish accruals for amounts estimated to be incurred, both reported and not yet reported, policy premiums and related legal and other claims administration costs. We develop estimates for claims as well as claims incurred but not yet reported using actuarial principles and assumptions based on historical and projected claim incidence patterns, claim size and the length of time over which payments are expected to be made. Actuarial estimates are updated as loss experience develops, additional claims are reported or settled and new information becomes available. Any changes in estimates are reflected in operating results in the period in which the estimates are changed. Depending on the policy year, adjustments to final expected paid amounts are determined through the ultimate life of the claim. At January 30, 2022 and October 31, 2021, the casualty insurance liability was $14.2 million and $13.9 million, respectively.

Recent Developments

On February 4, 2022, we reported that our Chief Financial Officer, Herbert Mueller, is currently unable to perform his duties due to a medical illness and will temporarily step away from his role as Chief Financial Officer. In Mr. Mueller’s absence, the Company’s former Chief Financial Officer, Paul Tomkins, will serve as Interim Chief Financial Officer, effective February 4, 2022, and will assume the day-to-day responsibilities of such role until further notice.

The Company and Vega Consulting, Inc. (“Vega”), an affiliate of ACS Solutions, a global provider of information technology solutions and services, announced on March 14, 2022, that Volt and Vega entered into a definitive merger agreement under which Volt will be acquired for $6.00 per share in cash. This per share purchase price represents a premium of 99% to the Company’s closing stock price on March 11, 2022. Vega will commence a tender offer no later than March 25, 2022, to acquire all outstanding shares of Volt for $6.00 per share in cash. The merger agreement was approved by Volt’s board of directors, which recommends that Volt stockholders tender their shares in the tender offer. Additional information related to the Merger Agreement can be found within the Form 8-K filed by the Company on March 14, 2022.
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Consolidated Results by Segment
Three Months Ended January 30, 2022
(in thousands)TotalNorth American Staffing International StaffingNorth American MSPCorporate and OtherEliminations
Net revenue$226,928 $191,196 $26,018 $9,709 $78 $(73)
Cost of services191,835 163,145 20,800 7,921 42 (73)
Gross margin35,093 28,051 5,218 1,788 36  
Selling, administrative and other operating costs34,976 21,409 4,280 815 8,472 — 
Restructuring and severance costs591 67 70 — 454 — 
Impairment charge23 — — — 23 — 
Operating income (loss)(497)6,575 868 973 (8,913) 
Other income (expense), net
(569)
Income tax provision
153 
Net loss$(1,219)
Three Months Ended January 31, 2021
(in thousands)TotalNorth American Staffing International StaffingNorth American MSPCorporate and Other Eliminations
Net revenue$217,958 $184,216 $24,013 $9,669 $119 $(59)
Cost of services185,276 157,636 19,851 7,784 64 (59)
Gross margin32,682 26,580 4,162 1,885 55  
Selling, administrative and other operating costs33,747 20,646 3,788 1,353 7,960 — 
Restructuring and severance costs632 (241)(8)— 881 — 
Impairment charge31 —   31  
Operating income (loss)(1,728)6,175 382 532 (8,817) 
Other income (expense), net
(391)
Income tax provision
327 
Net loss$(2,446)


Results of Operations Consolidated (Q1 2022 vs. Q1 2021)

Net revenue in the first quarter of fiscal 2022 increased $8.9 million, or 4.1%, to $226.9 million from $218.0 million in the first quarter of fiscal 2021. The net revenue increase was primarily due to an increase in our North American Staffing segment of $7.0 million and an increase in our International Staffing segment of $2.0 million. Excluding the negative impact of foreign currency fluctuations of $0.8 million, net revenue increased $9.8 million, or 4.5%.
Operating results in the first quarter of fiscal 2022 improved $1.2 million, to an operating loss of $0.5 million from $1.7 million in the first quarter of fiscal 2021. Excluding the restructuring and severance costs and impairment charges, operating results improved $1.2 million to operating income of $0.1 million. This increase in operating results of $1.2 million was primarily the result of improvements in our North American Staffing segment of $0.7 million, our International Staffing segment of $0.6 million and our North American MSP segment of $0.4 million, partially offset by a $0.5 million increase in operating loss in the Corporate and Other category.

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Results of Operations by Segment (Q1 2022 vs. Q1 2021)
Net Revenue
The North American Staffing segment revenue in the first quarter of fiscal 2022 increased $7.0 million, or 3.8%, to $191.2 million from $184.2 million in the first quarter of fiscal 2021. The increase is attributable to new business wins in a combination of retail and mid-market clients, combined with the expansion of business within existing clients and improvements in direct hire revenue.
The International Staffing segment revenue in the first quarter of fiscal 2022 increased $2.0 million, or 8.3%, to $26.0 million from $24.0 million in the first quarter of fiscal 2021, primarily due to increased direct hire revenue in the United Kingdom and Singapore, as well as increases in other staffing business in France, Belgium and the United Kingdom. Excluding the negative impact of foreign exchange rate fluctuations of $0.8 million, revenue increased $2.8 million, or 12.3%.
The North American MSP segment revenue in the first quarter of fiscal 2022 remained consistent with the first quarter of fiscal 2021. The slight improvement is primarily attributable to increased demand in its payroll service business, partially offset by a decline in its managed service business.
Cost of services in the first quarter of fiscal 2022 increased $6.5 million, or 3.5%, to $191.8 million from $185.3 million in the first quarter of fiscal 2021. This increase is primarily due to a $5.5 million increase in our North American Staffing segment related to the 3.8% increase in revenue and slightly unfavorable workers’ compensation development in the current period partially offset by an increase of $0.3 million in government wage subsidies. In addition, our International Staffing segment increased $0.9 million primarily as a result of the 8.3% increase in revenue.

Gross margin as a percent of revenue in the first quarter of fiscal 2022 increased to 15.5% from 15.0% in the first quarter of fiscal 2021. Our North American Staffing segment gross margin as a percent of revenue increased primarily due to a mix of higher margin business, partially offset by slightly unfavorable workers’ compensation development in the current quarter. Our International Staffing segment gross margin as a percent of revenue primarily increased due to an increase in direct hire revenue. Our North American MSP segment gross margin as a percent of revenue decreased primarily due to the mix of business. Government wage subsidies accounted for 40 basis points of the increase in the first quarter of fiscal 2022 compared to 30 basis points in the first quarter of fiscal 2021.
Selling, Administrative and Other Operating Costs
Selling, administrative and other operating costs in the first quarter of fiscal 2022 increased $1.3 million, or 3.6%, to $35.0 million from $33.7 million in the first quarter of fiscal 2021. The increase was primarily due to $0.7 million in labor as a result of changes in headcount and $0.5 million in equity compensation, partially offset by an increase in government wage subsidies of $1.4 million. In addition, there was an increase in professional fees of $0.8 million and depreciation expense of $0.3 million. As a percent of revenue, selling, administrative and other operating costs were 15.4% and 15.5% in the first quarter of fiscal 2022 and 2021, respectively.
Restructuring and Severance Costs
Restructuring and severance costs remained consistent at $0.6 million in both the first quarter of fiscal 2022 and 2021. Restructuring and severance costs in the first quarter of fiscal 2022 were primarily due to $0.5 million in ongoing costs of facilities exited in fiscal 2020. Restructuring and severance costs in the first quarter of fiscal 2021 primarily included $0.3 million of severance costs resulting from the elimination of certain positions as part of our continued efforts to reduce costs and $0.6 million related to the ongoing costs of facilities exited in fiscal 2020 partially offset by a $0.3 million lease termination gain.
Other Income (Expense), net
Other expense in the first quarter of fiscal 2022 increased $0.2 million, to $0.6 million from $0.4 million in the first quarter of fiscal 2021 due to an increase in non-cash foreign exchange losses primarily on intercompany balances.
Income Tax Provision
The income tax provision of $0.2 million and $0.3 million in the first quarter of fiscal 2022 and 2021, respectively, were primarily related to locations outside of the United States.

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LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows generated from operations and proceeds from the DZ Financing Program. Both operating cash flows and borrowing capacity under our financing arrangement are directly related to the levels of accounts receivable generated by our business. Our primary capital requirements include funding working capital, operating lease obligations and software-related expenditures.

We define our working capital as cash plus trade accounts receivable minus current liabilities. Our working capital requirements consist primarily of payroll, employee-related benefits and employment-related tax payments for our contingent staff and in-house employees and trade payables, offset by collections of customer receivables. Our most significant current asset is trade accounts receivable, which are generally on 15 - 45 day credit terms, and our most significant current liabilities are payroll related costs, which are generally paid weekly. Consequently, as the demand for our services increases, we generally see an increase in our working capital requirements, as we continue to pay our contingent employees on a weekly basis while the related accounts receivable is outstanding for much longer, which may result in a decline in operating cash flows. Conversely, as the demand for our services declines, we generally see a decrease in our working capital needs, as the existing accounts receivable are collected and not replaced at the same level. This may result in an increase in our operating cash flows; however, any such increase would not be expected to be sustained in the event that an economic downturn continued for an extended period.

Our business is subject to seasonality with our first fiscal quarter billings typically the lowest due to the holiday season and generally increasing in the third and fourth fiscal quarters when our customers increase the use of contingent labor. Accordingly, the first and fourth quarters of our fiscal year are generally the strongest for operating cash flows.

We manage our cash flow and related liquidity on a global basis. As mentioned, we fund payroll, taxes and other working capital requirements using cash generated by operating activities supplemented as needed from our borrowings. Our weekly payroll payments inclusive of employment-related taxes and payments to vendors are approximately $16.0 - $17.0 million. We generally target minimum global liquidity to be 1.5 times our average weekly requirements taking into account seasonality and cyclical trends. We also maintain minimum effective cash balances in foreign operations and use a multi-currency netting and overdraft facility for our European entities to further minimize overseas cash requirements. We believe our cash flow from operations, as well as our borrowing availability under our financing program, will be sufficient to meet our cash needs for the next twelve months based on current business plans.

Our capital allocation strategy is focused on strengthening our balance sheet and financial flexibility, as well as continuing to invest in our growth and profitability initiatives. This strategy includes effectively managing working capital to maximize operational efficiency, re-investing in our core growth initiatives, in both technology enhancements and sales and recruiting talent. These priorities demonstrate our ongoing commitment to Volt shareholders as we continue to execute on our overall strategic plan and return to sustainable profitability.

First Fiscal Quarter Ended January 30, 2022 compared to the First Fiscal Quarter Ended January 31, 2021

Our liquidity and available capital resources are impacted by four key components: cash, including cash equivalents and restricted cash, operating activities, investing activities and financing activities, as shown below compared to the prior fiscal year.

As of January 30, 2022, our cash, cash equivalents and restricted cash totaled $63.4 million compared to $76.6 million as of October 31, 2021.

Cash flows from operating, investing and financing activities, as reflected in our Condensed Consolidated Statements of Cash Flows, are summarized in the following table (in thousands):
Three Months Ended
January 30, 2022January 31, 2021
Net cash used in operating activities$(11,916)$(6,499)
Net cash used in investing activities (641)(963)
Net cash used in financing activities (16)(166)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(597)(13)
Net decrease in cash, cash equivalents and restricted cash$(13,170)$(7,641)

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Cash Flows - Operating Activities

The net cash used in operating activities in the three months ended January 30, 2022 increased $5.4 million from the cash used in operating activities in the three months ended January 31, 2021. This increase resulted primarily from a $6.6 million increase in cash used in operating assets and liabilities, primarily from a $13.1 million payment made towards deferred tax payments (discussed below), partially offset by an increase related to customer receipts and vendor payments. This increase in cash used in operating activities was partially offset by a decrease in net loss of $1.2 million.

Cash generated from operations was supplemented by the enactment of laws providing COVID-19 relief, most notably the CARES Act which allowed for the deferral of payments of the Company’s U.S. social security taxes between March 27, 2020 and December 31, 2020. As a result, $26.2 million of employer payroll tax payments were deferred with $13.1 million paid on January 3, 2022 and the remaining amounts payable with the December 31, 2022 tax payment in January 2023. In addition, certain state governments have delayed payment of various state payroll taxes for a shorter period of time. State payroll taxes of approximately $4.4 million deferred from the fourth quarter of fiscal 2021 were paid beginning in the first quarter of fiscal 2022. The Company’s payment of approximately $5.1 million of state payroll taxes will be deferred from the first quarter of fiscal 2022 with payments scheduled to begin in the second quarter of fiscal 2022.

Additionally in fiscal 2021, we determined that we were eligible for the employee retention tax credit (“ERTC”) under the CARES Act for certain wages paid through September 30, 2021, as our operations were fully or partially suspended due to government orders enacted in response to the COVID-19 pandemic. These credits reduced our payroll tax payments during fiscal 2021 through the first half of fiscal 2022 by $12.2 million and were treated as government wage subsidies.

Cash Flows - Investing Activities

The net cash used in investing activities in the three months ended January 30, 2022 was $0.6 million, as a result of purchases of property, equipment and software primarily relating to our investment in updating our business processes, back-office financial suite and information technology tools. The net cash used in investing activities in the three months ended January 31, 2021 was $1.0 million, principally for the purchases of property, equipment and software.

Cash Flows - Financing Activities

The net cash used in financing activities was minimal in the three months ended January 30, 2022. The net cash used in financing activities in the three months ended January 31, 2021 was $0.2 million as a result of debt issuance costs.
Financing Program

The DZ Financing Program is fully collateralized by certain receivables of the Company that are sold to a wholly-owned, consolidated, bankruptcy-remote subsidiary. To finance the purchase of such receivables, that subsidiary may request that DZ Bank make loans from time-to-time to that subsidiary which are secured by liens on those receivables. The Maximum Facility Amount, as defined in the DZ Financing Program is $100.0 million.

In December 2020, the Company amended the DZ Financing Program, which was originally executed on January 25, 2018. The modifications to the agreement were to (1) extend the Amortization Date, as defined in the DZ Financing Program, from January 25, 2023 to January 25, 2024; (2) extend the Facility Maturity Date, as defined in the DZ Financing Program, from July 25, 2023 to July 25, 2024; (3) revise an existing covenant to maintain positive net income in any fiscal year ending after 2020 to any fiscal year ending after 2021; (4) replace the existing Tangible Net Worth (“TNW”) covenant requirement, as defined in the DZ Financing Program, to a minimum TNW of $20.0 million through the Company’s fiscal quarter ending on or about July 31, 2021 and $25.0 million in each quarter thereafter; and (5) revise the eligibility threshold for the receivables of a large North American Staffing customer from 5% of eligible receivables to 8%, which increased our overall availability under the Program by $1.0 - $3.0 million. All other terms and conditions remained substantially unchanged.

Loan advances may be made under the DZ Financing Program through January 25, 2024 and all loans will mature no later than July 25, 2024. Loans will accrue interest (i) with respect to loans that are funded through the issuance of commercial paper notes, at the CP rate, and (ii) otherwise, at a rate per annum equal to adjusted LIBOR. The CP rate will be based on the rates paid by the applicable lender on notes it issues to fund related loans. Adjusted LIBOR is based on LIBOR for the applicable interest period and the rate prescribed by the Board of Governors of the Federal Reserve System for determining the reserve requirements with respect to Eurocurrency funding. If an event of default occurs, all loans shall bear interest at a rate per annum equal to the prime rate (the federal funds rate plus 3%) plus 2.5%.

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The DZ Financing Program also includes a letter of credit sub-facility with a sub-limit of $35.0 million. As of January 30, 2022, the letter of credit participation was $22.1 million inclusive of $20.9 million for the Company’s casualty insurance program and $1.2 million for the security deposit required under certain real estate lease agreements.

The DZ Financing Program contains customary representations and warranties as well as affirmative and negative covenants. The agreement also contains customary default, indemnification and termination provisions. The DZ Financing Program is not an off-balance sheet arrangement, as the bankruptcy-remote subsidiary is a 100%-owned consolidated subsidiary of the Company.

The Company is subject to certain financial and portfolio performance covenants under the DZ Financing Program, including (1) a minimum TNW, as defined in the DZ Financing Program, of $20.0 million through the Company’s fiscal quarter ending on or about July 31, 2021 and $25.0 million in each quarter thereafter; (2) positive net income in any fiscal year ending after 2021; (3) maximum debt to TNW ratio of 3:1; and (4) a minimum of $15.0 million in liquid assets, as defined in the DZ Financing Program.

At January 30, 2022, the Company had outstanding borrowings under the DZ Financing Program of $60.0 million. Borrowing availability, as defined under the DZ Financing Program, was $2.7 million and global liquidity was $49.6 million at January 30, 2022.

Our DZ Financing Program is subject to termination under certain events of default such as breach of covenants, including the financial covenants. At January 30, 2022, we were in compliance with all debt covenants. We believe, based on our 2022 plan, we will continue to be able to meet our financial covenants under the DZ Financing Program.

The following table sets forth our cash and global liquidity levels at the end of our last five fiscal quarters (in thousands):
Global Liquidity
January 31, 2021May 2, 2021August 21, 2021October 31, 2021January 30, 2022
Cash and cash equivalents (a)
$40,062 $47,231 $49,595 $71,373 $54,864 
Total outstanding debt$60,000 $60,000 $60,000 $60,000 $60,000 
Cash in banks (b)(c)
$36,962 $39,288 $43,076 $52,938 $46,930 
DZ Financing Program2,225 2,868 3,990 6,046 2,657 
Global liquidity 39,187 42,156 47,066 58,984 49,587 
Minimum liquidity threshold 15,000 15,000 15,000 15,000 15,000 
Available liquidity$24,187 $27,156 $32,066 $43,984 $34,587 

a.Per financial statements.
b.Amount generally includes outstanding checks.
c.Amounts in the USB collections account are excluded from cash in banks as the balance is included in the borrowing availability under the DZ Financing Program. As of January 30, 2022, the balance in the USB collections account included in the DZ Financing Program availability was $7.5 million.

Liquidity Outlook

As previously noted, our primary sources of liquidity are cash flows from operations and proceeds from our financing arrangements. Both operating cash flows and borrowing capacity under our financing arrangements are directly related to the levels of accounts receivable generated by our businesses. Our level of borrowing capacity under the DZ Financing Program increases or decreases in tandem with any increases or decreases in accounts receivable based on revenue fluctuations.

While we believe our cash provided by operating activities and borrowing availability under the DZ Financing Program will be sufficient to meet our operating working capital and capital expenditure requirements at a minimum for the next twelve months, the extent to which any on-going or resurgence of COVID-19 related impacts could affect our business, financial condition, results of operations and cash flows in the short- and medium-term cannot be predicted with certainty. We may also face unexpected costs or an adverse impact on our business operations in connection with government mandated COVID-19 vaccine-related policies and procedures. Any of the above could have a material adverse effect on our business, financial condition, results of operations and cash flows and require us to seek additional sources of liquidity and capital resources.
Many governments in countries and territories in which we do business have announced that certain payroll, income and other tax payments may be deferred without penalty for a certain period of time as well as providing other cash flow related relief packages. As noted above, we determined that we qualify for the payroll tax deferral under the CARES Act which allows us to delay payment of the employer portion of payroll taxes and we are evaluating whether we qualify for certain employment tax credits. If we qualify for such
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credits, the credits will be treated as government wage subsidies which will offset related operating expenses. We continue to monitor these relief packages to take advantage of all of those which are available to us.

Entering fiscal 2022, we have significant tax benefits including federal net operating loss ("NOL") carryforwards of $210.0 million, U.S. state NOL carryforwards of $226.3 million, international NOL carryforwards of $8.3 million and federal tax credits of $53.3 million, which are fully reserved with a valuation allowance which we will be able to utilize against future profits. As of October 31, 2021, the U.S. federal NOL carryforwards will expire at various dates between 2031 and 2038 (with some indefinite), the U.S. state NOL carryforwards will expire at various dates beginning in 2022 (with some indefinite), the international NOL carryforwards will expire at various dates beginning in 2022 (with some indefinite) and federal tax credits will expire between 2022 and 2040.

In addition to our discussion and analysis surrounding our liquidity and capital resources, our significant contractual obligations and commitments as of January 30, 2022, include:

Debt Obligations and Interest Payments - As of January 30, 2022, our outstanding debt balance was $60.0 million. See Note 9, “Debt” within our consolidated financial statements for further detail of our debt and the timing of expected future principal and interest payments.

Lease Liabilities – As of January 30, 2022, our remaining contractual commitment for leases was $39.6 million. See Note 3, “Leases,” within our consolidated financial statements for further detail of our obligations and the timing of expected future payments, including a five-year maturity schedule.

Software-Related Expenditures – As of January 30, 2022, we had contractual commitments for software-related expenditures of $3.7 million. We anticipate capital expenditures in fiscal 2022 of approximately $4.0 - $5.0 million as we continue to support our strategic initiatives through improved technology, as necessary. While the majority of our software-related contractual obligations does not currently extend beyond fiscal 2022, we anticipate annual payments of approximately $5.5 million for the on-going use of our core technology.

Casualty Insurance - As of January 30, 2022, we had accrued casualty claims of $14.2 million under our Casualty Insurance Program. While we cannot accurately predict future insurance claim liability, we estimate our related expenditures in fiscal 2022 to be in the range of $8.0 - $11.0 million, based on historical data.

Off-Balance Sheet Arrangements

As of January 30, 2022, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information in this section should be read in conjunction with the information on financial market risk related to non-U.S. currency exchange rates, changes in interest rates and other financial market risks in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended October 31, 2021.
Market risk is the potential economic gain or loss that may result from changes in market rates and prices. In the normal course of business, the Company’s earnings, cash flows and financial position are exposed to market risks relating to the impact of interest rate changes and foreign currency exchange rate fluctuations. We limit these risks through risk management policies and procedures.
Interest Rate Risk

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. At January 30, 2022, we had cash and cash equivalents on which interest income is earned at variable rates. At January 30, 2022, we had a long-term $100.0 million accounts receivable securitization program, which can be increased subject to credit approval from DZ Bank, to provide additional liquidity to meet our short-term financing needs.

The interest rates on these borrowings and financings are variable and, therefore, net interest expense and other expense are affected by the general level of U.S. and foreign interest rates. Based upon the current levels of cash invested and utilization of the securitization program, on a short-term basis, a hypothetical 1-percentage-point increase in interest rates would have increased net interest expense by less than $0.1 million and a hypothetical 1-percentage-point decrease in interest rates would have decreased net interest expense by $0.2 million in the first three months of fiscal 2022.
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