UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	For the quarterly period ended ~~May 4, 2014~~February 1, 2015


¨	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.)
1065 Avenue of Americas, New York, New York	10018
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(212) 704-2400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. ¨ x Yes x¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer x	Non-accelerated filer ¨	Smaller reporting company ¨

		(Do not check if a smaller reporting company)

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

As of ~~June 10, 2014,~~March 5, 2015, there were ~~20,862,795~~20,977,796 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 Six Months Ended
May 4, 2014 April 28, 2013 May 4, 2014 April 28, 2013

REVENUE:
Staffing service revenue $ 406,733
$ 476,729
$ 799,002
$ 951,091
Other revenue 44,752
42,995
89,631
88,838
NET REVENUE 451,485
519,724
888,633
1,039,929

EXPENSES:
Direct cost of staffing services revenue 345,899
413,116
687,359
825,109
Cost of other revenue 38,656
39,873
75,934
79,626
Selling, administrative and other operating costs 64,534
74,992
131,642
145,329
Amortization of purchased intangible assets 240
346
559
691
Restructuring costs 918
948
2,279
1,688
Restatement, investigations and remediation 593
7,387
5,261
21,207
TOTAL EXPENSES 450,840
536,662
903,034
1,073,650

OPERATING INCOME (LOSS) 645
(16,938 ) (14,401 ) (33,721 )

OTHER INCOME (EXPENSE), NET:
Interest income (expense), net (802 ) (897 ) (1,662 ) (1,229 )
Foreign exchange gain (loss), net (1,175 ) 843
(1,221 ) 1,477
Other income (expense), net 215
114
142
81
TOTAL OTHER INCOME (EXPENSE), NET (1,762 ) 60
(2,741 ) 329

LOSS BEFORE INCOME TAXES (1,117 ) (16,878 ) (17,142 ) (33,392 )
Income tax provision 2,378
583
3,427
1,159
NET LOSS $ (3,495 ) $ (17,461 ) $ (20,569 ) $ (34,551 )

PER SHARE DATA:

Basic and Diluted:
Net loss $ (0.17 ) $ (0.84 ) $ (0.99 ) $ (1.66 )
Weighted average number of shares 20,861
20,825
20,855
20,819



	Three Months Ended
	February 1, 2015			February 2, 2014
	February 1, 2015			February 2, 2014
REVENUE:
Staffing service revenue	$	360,821		$	392,269
Other revenue	22,245			29,359
NET REVENUE	383,066			421,628

EXPENSES:
Direct cost of staffing services revenue	310,819			339,796
Cost of other revenue	19,605			24,133
Selling, administrative and other operating costs	59,964			65,599
Restructuring costs	—			657
Restatement, investigations and remediation	—			2,668
TOTAL EXPENSES	390,388			432,853

OPERATING LOSS	(7,322		)	(11,225		)

OTHER INCOME (EXPENSE), NET:
Interest income (expense), net	(634		)	(860		)
Foreign exchange gain (loss), net	437			388
Other income (expense), net	98			62
TOTAL OTHER INCOME (EXPENSE), NET	(99		)	(410		)

LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(7,421		)	(11,635		)
Income tax provision	1,379			1,047
NET LOSS FROM CONTINUING OPERATIONS	(8,800		)	(12,682		)
DISCONTINUED OPERATIONS
Loss from discontinued operations net of income taxes (including loss on disposal of $1.2 million)	(4,519		)	(4,392		)
NET LOSS	$	(13,319	)	$	(17,074	)

PER SHARE DATA:

Basic:
Loss from continuing operations	$	(0.42	)	$	(0.61	)
Loss from discontinued operations	(0.22		)	(0.21		)
Net loss	$	(0.64	)	$	(0.82	)
Weighted average number of shares	20,930			20,849
Diluted:
Loss from continuing operations	$	(0.42	)	$	(0.61	)
Loss from discontinued operations	(0.22		)	(0.21		)
Net loss	$	(0.64	)	$	(0.82	)
Weighted average number of shares	20,930			20,849

See accompanying Notes to Condensed Consolidated Financial Statements.

VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)

Three Months Ended Six Months Ended
May 4, 2014 April 28, 2013 May 4, 2014 April 28, 2013

NET LOSS $ (3,495 ) $ (17,461 ) $ (20,569 ) $ (34,551 )
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $0 1,445
(1,196 ) 1,864
(2,315 )
Unrealized gain (loss) on marketable securities, net of taxes of $0 4
(12 ) 20
(1 )
Total other comprehensive income (loss) 1,449
(1,208 ) 1,884
(2,316 )
COMPREHENSIVE LOSS $ (2,046 ) $ (18,669 ) $ (18,685 ) $ (36,867 )



	Three Months Ended
	February 1, 2015			February 2, 2014
	February 1, 2015			February 2, 2014
NET LOSS	$	(13,319	)	$	(17,074	)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of taxes of $0 and $0, respectively	(1,149		)	419
Unrealized gain on marketable securities, net of taxes of $0 and $0, respectively	4			16
Total other comprehensive income (loss)	(1,145		)	435
COMPREHENSIVE LOSS	$	(14,464	)	$	(16,639	)

See accompanying Notes to Condensed Consolidated Financial Statements.

VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)


	May 4, 2014			November 3, 2013			February 1, 2015			November 2, 2014
	(unaudited)						(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	16,552		$	11,114		$	14,796		$	9,105
Restricted cash and short-term investments	47,735			53,500			18,477			32,436
Trade accounts receivable, net of allowances of $1,426 and $1,811, respectively	252,493			293,305
Trade accounts receivable, net of allowances of $968 and $868, respectively							216,439			248,101
Recoverable income taxes	16,302			17,150			18,097			18,311
Prepaid insurance and other current assets	34,771			35,345			24,432			26,255
Assets held for sale							—			24,220
TOTAL CURRENT ASSETS	367,853			410,414			292,241			358,428
Prepaid insurance and other assets, excluding current portion	45,955			52,574			46,809			39,600
Property, equipment and software, net	30,711			37,324			25,659			26,304
TOTAL ASSETS	$	444,519		$	500,312		$	364,709		$	424,332

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued compensation	$	47,114		$	53,474		$	36,201		$	41,182
Accounts payable	53,063			57,165			48,329			55,873
Accrued taxes other than income taxes	19,873			19,520			18,901			17,099
Accrued insurance and other	37,731			44,133			35,975			39,104
Deferred revenue, net, current portion	10,292			13,335			4,007			3,491
Short-term borrowings, including current portion of long-term debt	148,416			168,114			115,923			129,417
Liabilities held for sale							—			19,126
TOTAL CURRENT LIABILITIES	316,489			355,741			259,336			305,292
Accrued insurance and other, excluding current portion	16,507			14,705			10,932			10,611
Deferred revenue, net, excluding current portion	2,698			2,839
Income taxes payable, excluding current portion	8,998			8,659			8,677			8,556
Deferred income taxes							1,285			1,263
Long-term debt, excluding current portion	7,681			8,127			7,057			7,216
TOTAL LIABILITIES	352,373			390,071			287,287			332,938
Commitments and contingencies

STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00; Authorized - 500,000 shares; Issued - none	—			—			—			—
Common stock, par value $0.10; Authorized - 120,000,000 shares; Issued - 23,550,102 and 23,536,769, respectively; Outstanding - 20,862,795 and 20,849,462, respectively	2,355			2,354
Common stock, par value $0.10; Authorized - 120,000,000 shares; Issued - 23,625,103 and 23,610,103, respectively; Outstanding - 20,937,796 and 20,922,796, respectively							2,363			2,361
Paid-in capital	72,329			72,003			73,669			73,194
Retained earnings	62,701			83,007			50,815			64,119
Accumulated other comprehensive loss	(3,359		)	(5,243		)	(7,545		)	(6,400		)
Treasury stock, at cost; 2,687,307 shares	(41,880		)	(41,880		)	(41,880		)	(41,880		)
TOTAL STOCKHOLDERS' EQUITY	92,146			110,241			77,422			91,394
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	444,519		$	500,312		$	364,709		$	424,332

See accompanying Notes to Condensed Consolidated Financial Statements.

VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Six Months Ended						Three Months Ended
	May 4, 2014			April 28, 2013			February 1, 2015			February 2, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(20,569	)	$	(34,551	)	$	(13,319	)	$	(17,074	)
Adjustment to reconcile net loss to cash provided by (used in) operating activities:
Loss from discontinued operations, net of income taxes							(4,519		)	(4,392		)
Net loss from continuing operations							(8,800		)	(12,682		)
Adjustment to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	6,958			7,830			1,771			2,606
Provision (release) of doubtful accounts and sales allowances	(274		)	69			132			(155		)
Unrealized foreign currency exchange loss (gain)	1,794			(1,539		)	(915		)	179
Loss on dispositions of property, equipment and software	154			59
Gain on dispositions of property, equipment and software							(118		)	(72		)
Deferred income tax provision (benefit)	1,415			(1,957		)	(79		)	1
Share-based compensation expense	327			301			476			172
Change in operating assets and liabilities:
Trade accounts receivable	41,018			41,729			32,184			42,131
Restricted cash related to customer contracts	2,370			8,134			4,313			1,253
Prepaid insurance and other assets	7,219			(7,993		)	1,257			5,443
Accounts payable	(3,945		)	(10,467		)	(7,333		)	(8,306		)
Accrued expenses	(12,866		)	3,512
Deferred revenue, net	(3,433		)	(1,106		)
Other liabilities	(207		)	(140		)
Accrued expenses and other liabilities							(4,898		)	(4,481		)
Income taxes	1,220			(4,270		)	49			(1,823		)
Net cash provided by (used in) operating activities	21,181			(389		)
Net cash provided by operating activities							18,039			24,266
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of investments	985			1,007			569			636
Purchases of investments	(308		)	(943		)	(238		)	(227		)
Proceeds from sale of software related assets	3,000			—
Proceeds from sale of property, equipment, and software	4			202			131			3,000
Purchases of property, equipment, and software	(2,595		)	(4,151		)	(1,234		)	(1,252		)
Net cash provided by (used in) investing activities	1,086			(3,885		)	(772		)	2,157
CASH FLOWS FROM FINANCING ACTIVITES:
Increase in cash restricted as collateral for borrowings	2,960			4,269
Decrease in cash restricted as collateral for borrowings							9,123			(16		)
Net change in short-term borrowings	(19,582		)	10,002			(13,506		)	(22,313		)
Repayment of long-term debt	(411		)	(383		)	(147		)	(203		)
Net cash provided by (used in) financing activities	(17,033		)	13,888
Net cash used in financing activities							(4,530		)	(22,532		)
Effect of exchange rate changes on cash and cash equivalents	204			(187		)	402			176
CASH FLOWS FROM DISCONTINUED OPERATIONS:
Cash flow from operating activities							(3,237		)	(1,562		)
Cash flow from investing activities							(4,000		)	(268		)
Net cash used in discontinued operations							(7,237		)	(1,830		)
Net increase in cash and cash equivalents	5,438			9,427			5,902			2,237
Cash and cash equivalents, beginning of period	11,114			26,483			9,105			9,847
Change in cash from discontinued operations							(211		)	(1,161		)
Cash and cash equivalents, end of period	$	16,552		$	35,910		$	14,796		$	10,923

Cash paid during the period:
Interest	$	1,885		$	1,411		$	644		$	953
Income taxes	$	2,047		$	8,918		$	329		$	1,136

Supplemental disclosure of noncash investing activity:
Note receivable in exchange for Computer Systems segment net assets sold							$	8,363		$	—

See accompanying Notes to Condensed Consolidated Financial Statements.

VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

For the Fiscal Periods Ended ~~May 4,~~February 1, 2015 and February 2, 2014 ~~and April 28, 2013~~

(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, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended November ~~3, 2013.~~2, 2014. 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, are 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 ~~connection~~conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended November ~~3, 2013.~~

The Company’s fiscal year ends on the Sunday nearest October 31st. The 2014 fiscal year consists of 52 weeks while the 2013 fiscal year consisted of 53 weeks. The three and six month periods ended in fiscal 2014 and 2013 each consisted of 13 weeks and 26 weeks, respectively.2, 2014.

Restatement, investigations and remediation costs are discussed further in ~~our~~the Company's Form 10-K for the fiscal year ended November ~~3, 2013,~~2, 2014, and are comprised of financial and legal consulting, audit and related costs ofincurred for the ~~restatement, related investigations, and~~ completion of delayed filings required under SEC regulations.

Certain reclassifications have been made to the prior year financial statements in order to conform to the current year's presentation.

NOTE 2: Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

New Accounting Standards Not Yet Adopted by the Company

In ~~April 2014,~~February 2015, the FASB issued Accounting Standards Update ("ASU") No. ~~2014-08,~~2015-02, ~~Presentation~~Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a variable interest entity ("VIE"), and (c) variable interests in a VIE held by related parties of ~~Financial Statements and Property, Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,~~ ~~which requires only disposals representing a strategic shift in operations that have a major effect on operations and financial results~~the reporting enterprise require the reporting enterprise to ~~be presented in discontinued operations. This~~consolidate the VIE. The guidance ~~also requires expanded financial disclosures about discontinued operations and significant disposals that do not qualify as discontinued operations. This standard~~ is effective for ~~fiscal years~~public business entities for annual and interim ~~reporting~~ periods in fiscal years beginning after December 15, ~~2014.~~2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on the consolidated financial ~~statements, but it is not expected to have a significant impact on the Company’s consolidated financial position or results of operations upon adoption in the first quarter of fiscal 2016.~~statements.

In ~~May 2014,~~January 2015, the FASB ~~and the International Accounting Standards Board ("IASB")~~ issued ASU No. ~~2014-09,~~2015-01, ~~Revenue from Contracts with Customers (Topic 606).~~Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. ~~This~~The new guidance ~~substantially converges final standards on revenue recognition between~~eliminates the ~~FASB~~separate presentation of extraordinary items, net of tax and ~~IASB providing a framework on addressing revenue recognition issues. Upon~~ the ~~effective date,~~related earnings per share, but does not affect the requirement to disclose material items that are unusual in nature or infrequently occurring. The ASU ~~replaces almost~~applies to all ~~existing revenue recognition guidance, including industry specific guidance, in United States Generally Accepted Accounting Principles ("GAAP"). This ASU is effective~~entities for fiscal years, and interim ~~reporting~~ periods within those fiscal years, beginning after December 15, ~~2016~~2015. Entities have the option to apply the new guidance prospectively or retrospectively, and ~~will become effective for the Company in the first quarter of fiscal year 2018.~~can choose early adoption. The Company is currently assessing the impact ~~that~~of the adoption of this ~~standard will have~~guidance on ~~its~~the consolidated financial ~~statements or related disclosures.~~statements.

NOTE 3: Discontinued Operations

On December 1, 2014, the Company completed the sale of its Computer Systems segment to NewNet Communication Technologies, LLC ("NewNet"), a Skyview Capital, LLC, portfolio company. The Company met all of the criteria to classify that segment's assets and liabilities as held for sale in the fourth quarter of fiscal year 2014. The results of the Computer Systems segment are presented as discontinued operations and excluded from continuing operations and from segment results for all periods presented.

The proceeds of the transaction are a $10.0 million note bearing interest at one half percent (0.5 percent) per year due in four years and convertible into a capital interest of up to 20% in NewNet. The Company may convert the note at any time and is entitled to receive early repayment in the event of certain events such as a change in control of NewNet. The proceeds are in exchange for the ownership of Volt Delta Resources, LLC and its operating subsidiaries, which comprise the Company's Computer Systems segment, and payment of $4.0 million by the Company during the first 45 days following the transaction. An additional payment will be made between the parties based on the comparison of the actual transaction date working capital amount to an expected working capital amount of $6.0 million. The note is valued at $8.4 million which approximates its fair value. The resulting discount will be amortized over four years with an effective interest rate of 5.1%.

The Company recognized a loss on disposal of $1.2 million from the sale transaction. The total related costs associated with this transaction were $2.2 million comprised of $0.9 million in severance costs, $0.9 million of professional fees and $0.4 million of lease obligation costs. These costs are recorded in discontinued operations in the consolidated statements of operations. As of February 1, 2015, $0.7 million has been paid and $1.5 million remains payable and is included in accrued compensation and accrued insurance and other in the Condensed Consolidated Balance Sheets.

The following table reconciles the major classes of net assets and liabilities classified as held for sale in the Condensed Consolidated Balance Sheet (in thousands):



	November 2, 2014
Assets included as part of discontinued operations
Cash and cash equivalents	$	282
Trade accounts receivable, net	10,535
Recoverable income taxes	921
Prepaid insurance and other assets	9,251
Property, equipment and software, net	3,231
Total assets of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheets	$	24,220

Liabilities included as part of discontinued operations
Accrued compensation	$	2,272
Accounts payable	992
Accrued taxes other than income taxes	649
Accrued insurance and other	5,794
Deferred revenue	9,419
Total liabilities of the disposal group classified as held for sale in the Condensed Consolidated Balance Sheets	$	19,126

Deferred tax assets of $6,842 are included above in prepaid insurance and other assets as of November 2, 2014. Deferred tax liabilities of $3,834 are included above in accrued insurance and other as of November 2, 2014.

The following table reconciles the major line items in the Condensed Consolidated Statements of Operations for discontinued operations (in thousands):



	Three Months Ended
	February 1, 2015			February 2, 2014
Loss on discontinued operations
Net revenue	$	4,708		$	15,520
Cost of revenue	(5,730		)	(13,145		)
Selling, administrative and other operating costs	(1,388		)	(5,493		)
Restructuring and other related costs	(1,709		)	(704		)
Other income (expense)	978			(568		)
Loss from discontinued operations	(3,141		)	(4,390		)
Loss on disposal of discontinued operations	(1,187		)	—
Total loss from discontinued operations	(4,328		)	(4,390		)
Income tax provision	191			2
Total loss from discontinued operations that is presented in the Condensed Consolidated Statements of Operations	$	(4,519	)	$	(4,392	)

Note 4: Accumulated Other Comprehensive Loss



The changes in accumulated other comprehensive loss for the three months ended February 1, 2015 were (in thousands):

	Foreign Currency Translation			Unrealized Gain (Loss) on Marketable Securities

Accumulated other comprehensive loss at November 2, 2014	$	(6,365	)	$	(35	)
Other comprehensive loss before reclassifications	(4,330		)	—
Amounts reclassified from accumulated other comprehensive income	3,181			4
Net current period other comprehensive income (loss)	(1,149		)	4
Accumulated other comprehensive loss at February 1, 2015	$	(7,514	)	$	(31	)

Reclassifications from accumulated other comprehensive loss for the three months ended February 1, 2015 were (in thousands):

	Three Months Ended February 1, 2015
Foreign currency translation
Sale of foreign subsidiaries	$	(3,181	)
Income tax provision (benefit)	—
Total reclassifications, net of tax	$	(3,181	)

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented

Foreign currency translation
Sale of foreign subsidiaries	$	3,181		Discontinued operations

NOTE 3:5: Restricted Cash and Short-Term Investments

Restricted cash and short-term investments include 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 associated with the Company’s Short-Term Credit Facility. Distribution of payments to associate vendors are 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. Changes in

restricted cash collateral for credit facilities isare reflected in financing activities while changes in restricted cash under managed service programs isare classified as an operating activity, as this cash is directly related to the operations of this business.

At ~~May 4, 2014~~February 1, 2015 and November ~~3, 2013,~~2, 2014, restricted cash and short-term investments included ~~$13.2~~$12.2 million and ~~$15.6~~$16.5 million, respectively, restricted for payment to associate vendors and ~~$28.8~~$1.3 million and ~~$31.8~~$10.4 million, respectively, restricted as collateral under the Short-Term Credit Facility.

At ~~May 4, 2014~~February 1, 2015 and November ~~3, 2013,~~2, 2014, restricted cash and short-term investments included ~~$5.7~~$5.0 million and ~~$6.1~~$5.5 million, respectively, of short-term investments. These short-term investments consisted primarily ~~consisted~~ of the fair value of deferred compensation investments corresponding to employees’ selections, primarily in mutual funds, based on quoted prices in active ~~markets for identical assets.~~markets.

NOTE ~~4: Hedging~~

The Company enters into non-derivative financial instruments to hedge its net investment in certain foreign subsidiaries. During the first six months of fiscal 2014 and 2013, the Company primarily used short-term foreign currency borrowings to hedge its net investments in certain foreign operations.

At May 4, 2014 and November 3, 2013, the Company had outstanding $22.5 million and $22.3 million, respectively, of foreign currency denominated short-term borrowings used to hedge the Company’s net investment in certain foreign subsidiaries. The Company does not designate and document these instruments as hedges under Accounting Standards Codification ("ASC") 815 “Derivatives and Hedging,” and as a result gains and losses associated with these instruments are included in Foreign Exchange Gain (Loss), net in our Condensed Consolidated Statements of Operations. During the second quarter of fiscal 2014 and 2013, net gains (losses) on these borrowings and instruments of $(0.5) million and $0.5 million, respectively, were included in Foreign Exchange Gain (Loss), net in the Condensed Consolidated Statements of Operations. For the six months ended May 4, 2014 and April 28, 2013, net gains (losses) on these borrowings and instruments of $(0.4) million and $0.4 million, respectively, were included in Foreign Exchange Gain (Loss), net in the Condensed Consolidated Statements of Operations.

~~NOTE 5:~~6: Income Taxes

Under ASC 270, “Interim Reporting,” and ASC 740-270, “Income Taxes – Intra Period Tax Allocation,” the Company is required to adjust its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate. 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 ~~provision for income taxes consists of provisions for federal, state and foreign income taxes. Accordingly, the effective~~ income tax ~~rate is a composite rate reflecting~~provision reflects the geographic mix of earnings in various federal, state and foreign tax jurisdictions and their applicable ~~rates. Our interim provision for income taxes is measured using an estimated annual~~rates resulting in a composite effective tax rate, adjusted for discrete items that occur within the periods presented. Our future effective tax rates could be adversely affected by earnings being lower than anticipated in countries with lower statutory rates, greater losses than anticipated in countries with lower statutory tax rates, increases in recorded valuation allowances of tax assets, or changes in tax laws.

The provision for income taxes in the second quarter of fiscal 2014 was $2.4 million compared to $0.6 million in 2013 and $3.4 million compared to $1.2 million for the six months ended May 4, 2014 and April 28, 2013, respectively.rate. The Company’s cumulative results for substantially all United States ~~domestic~~ and certain non-United States 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 provision for income taxes in the first quarter of fiscal 2015 and 2014 was $1.4 million and $1.0 million, respectively. 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.

The Company adjusts its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate, consistent with Accounting Standards Codification ("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.

NOTE 6:7: Debt

The Company had borrowings at ~~May 4, 2014~~February 1, 2015 of $~~147.5~~115.0 million under various short-term credit facilities that provided for up to $245.0 million in borrowings and letters of credit, under which it was required to maintain cash collateral of $~~28.8~~1.3 million. Available borrowing was $~~18.2~~15.3 million under the $200.0 million Short-Term Financing Program ~~and~~ ~~$22.5 million~~as of February 1, 2015. There were no outstanding borrowings under the $45.0 million Short-Term Credit Facility as of ~~May 4, 2014.~~February 1, 2015.

At ~~May 4, 2014~~February 1, 2015 and November ~~3, 2013,~~2, 2014, the Company had outstanding borrowing under the Short-Term Financing Program of $~~125.0~~115.0 million and $~~142.0~~120.0 million, respectively, ~~and bore a~~which carried weighted average annual interest ~~rate~~rates of 1.7% and 1.6% during the ~~second~~first quarter of fiscal 2015 and 2014, ~~and 2013,~~ respectively, ~~and 1.6% during the first six months of 2014 and 2013,~~ which is inclusive of certain facility and program fees.

There were no outstanding borrowings under the $45.0 million Short-Term Credit Facility as of February 1, 2015. At ~~May 4,~~November 2, 2014, ~~and November 3, 2013,~~ the Company had ~~drawn under the Short-Term Credit Facility~~ ~~$22.5~~$8.5 million ~~and~~ ~~$22.3 million, respectively,~~ outstanding in various currencies used primarily to hedge the Company’s net investment in certain foreign subsidiaries. During the ~~second~~first quarter of fiscal 2014, ~~and 2013,~~ borrowings ~~bore~~carried a weighted average annual interest rate of 1.9% ~~and~~ ~~1.8%~~, ~~respectively, and 1.9% and 2.0% during the first six months of 2014 and 2013, respectively,~~ which is inclusive of the facility fee.

At February 1, 2015, the Company had $8.0 million of long-term debt, of which $0.9 million was current.

NOTE 8: Hedging

The Company enters into non-derivative financial instruments to hedge its net investment in certain foreign subsidiaries. During the first three months of fiscal 2015 and 2014, the Company primarily used short-term foreign currency borrowings to hedge its net investments in certain foreign operations.

There were no outstanding borrowings under the $45.0 million Short-Term Credit Facility as of February 1, 2015. At November 2, 2014, the Company had $8.5 million outstanding of foreign currency denominated short-term borrowings. The Company does not designate and document these instruments as hedges under ASC 815 “Derivatives and Hedging,” and as a result gains and losses associated with these instruments are included in foreign exchange gain (loss), net in the Condensed Consolidated Statements of Operations. During the first quarter of fiscal 2015 and 2014, net gains (losses) on these borrowings and instruments of $38,000 and $0.1 million were included in foreign exchange gain (loss), net in the Condensed Consolidated Statements of Operations.

NOTE 7:9: Earnings (Loss) Per Share

Basic and diluted net ~~loss~~income (loss) per share is calculated as follows (in thousands, except per share amounts):

Three Months Ended Six Months Ended
May 4, 2014 April 28, 2013 May 4, 2014 April 28, 2013
Numerator
Net loss $ (3,495 ) $ (17,461 ) $ (20,569 ) $ (34,551 )
Denominator
Basic weighted average number of common shares 20,861
20,825
20,855
20,819
Dilutive weighted average number of common shares 20,861
20,825
20,855
20,819
Net loss per share - basic $ (0.17 ) $ (0.84 ) $ (0.99 ) $ (1.66 )
Net loss per share - diluted $ (0.17 ) $ (0.84 ) $ (0.99 ) $ (1.66 )



	Three Months Ended
	February 1, 2015			February 2, 2014
Numerator
Net loss from continuing operations	$	(8,800	)	$	(12,682	)
Loss from discontinued operations, net of income taxes	(4,519		)	(4,392		)
Net loss	$	(13,319	)	$	(17,074	)
Denominator
Basic weighted average number of shares	20,930			20,849
Diluted weighted average number of shares	20,930			20,849

Basic:
Net loss from continuing operations	$	(0.42	)	$	(0.61	)
Loss from discontinued operations, net of income taxes	(0.22		)	(0.21		)
Net loss	$	(0.64	)	$	(0.82	)

Diluted:
Net loss from continuing operations	$	(0.42	)	$	(0.61	)
Loss from discontinued operations, net of income taxes	(0.22		)	(0.21		)
Net loss	$	(0.64	)	$	(0.82	)

Options to purchase ~~465,450~~762,150 and ~~532,350~~484,850 shares of the Company’s common stock were outstanding at ~~May 4,~~February 1, 2015 and February 2, 2014, ~~and April 28, 2013,~~ respectively. Additionally, there were ~~60,001~~40,000 and ~~56,667~~73,334 restricted shares outstanding at ~~May 4,~~February 1, 2015 and February 2, 2014, ~~and April 28, 2013,~~ respectively. The options and restricted shares were not included in the computation of diluted ~~loss~~earnings (loss) per share in the ~~three months and six months~~first quarter of fiscal ~~2014~~2015 and ~~2013~~2014 because the effect of their inclusion would have been anti-dilutive as a result of the Company’s net loss position in those ~~fiscal~~ periods.

NOTE 8:10: Commitments and Contingencies


(a)	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 segment. 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.

In July 2013, Oracle Corporation brought suit against the Company alleging copyright infringement and related claims. The complaint alleges that the Company's information technology infrastructure business provided customer installation services of software updates for Oracle’s computer operating system software and system firmware without appropriate authorization or license.

Oracle alleges that it provides customers with updates only if they have purchased support agreements covering servers on which updates will be installed. The Company has asserted defenses and counterclaims of anti-competitive practices and related claims. The matter is scheduled for trial to commence on August 3, 2015.

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.


(b)	Indemnification

The Company indemnifies its officers, directors and certain employees for certain events or occurrences while the employee, officer or director is, or was, serving at the Company’s request in such capacity, as permitted under New York law.

NOTE 9:11: Segment Data

The Company’s operating segments are determined in accordance with the Company’s internal management structure, which is based on operating activities.

Segment operating income (loss) is comprised of segment net revenues less direct cost of staffing services revenue or cost of other revenue, selling, administrative and other operating costs, amortization of purchased intangible assets and restructuring costs. The Company allocates all operating costs to the segments except for ~~the~~costs not directly relating to operating activities such as corporate-wide general and administrative costs and fees related to restatement, investigations and ~~remediation~~remediation. These costs are not allocated because doing so would not enhance the understanding of segment operating performance and they are not used by management to ~~the segments. These allocations are included in the calculation of each segment’s operating income (loss).~~measure segment performance.

Financial data concerning the Company’s revenue and segment operating income (loss) by reportable operating segment in the ~~second~~first quarter of fiscal ~~2014~~2015 and ~~2013 and for the first six months of fiscal~~ 2014 ~~and 2013~~ are summarized in the following table:

Three Months Ended May 4, 2014
(in thousands) Total Staffing Services Computer Systems Other
Revenue
Staffing service revenue $ 406,733
$ 406,733
$ —
$ —
Other revenue 44,752
—
15,405
29,347
Net revenue 451,485
406,733
15,405
29,347
Expenses
Direct cost of staffing services revenue 345,899
345,899
—
—
Cost of other revenue 38,656
—
14,590
24,066
Selling, administrative and other operating costs 62,575
53,175
4,911
4,489
Amortization of purchased intangible assets 240
25
214
1
Restructuring costs 598
577
(81 ) 102
Segment operating income (loss) 3,517

7,057

(4,229 )
689
Corporate general and administrative 2,279

Restatement, investigations and remediation 593

Operating income $ 645

Three Months Ended April 28, 2013
(in thousands) Total Staffing Services Computer Systems Other
Revenue
Staffing service revenue $ 476,729
$ 476,729
$ —
$ —
Other revenue 42,995
—
18,752
24,243
Net revenue 519,724
476,729
18,752
24,243
Expenses
Direct cost of staffing services revenue 413,116
413,116
—
—
Cost of other revenue 39,873
—
16,742
23,131
Selling, administrative and other operating costs 72,612
62,058
6,024
4,530
Amortization of purchased intangible assets 346
12
215
119
Restructuring costs 948
133
815
—
Segment operating income (loss) (7,171 ) 1,410
(5,044 ) (3,537 )
Corporate general and administrative 2,380

Restatement, investigations and remediation 7,387

Operating loss $ (16,938 )



	Three Months Ended February 1, 2015
(in thousands)	Total			Staffing Services			Other
Revenue
Staffing service revenue	$	360,821		$	360,821		$	—
Other revenue	22,245			—			22,245
Net revenue	383,066			360,821			22,245
Expenses
Direct cost of staffing services revenue	310,819			310,819			—
Cost of other revenue	19,605			—			19,605
Selling, administrative and other operating costs	53,941			50,580			3,361
Segment operating loss	(1,299		)	(578		)	(721		)
Corporate general and administrative	6,023
Operating loss	$	(7,322	)

810

Six Months Ended May 4, 2014
(in thousands) Total Staffing Services Computer Systems Other
Revenue
Staffing service revenue $ 799,002
$ 799,002
$ —
$ —
Other revenue 89,631
—
30,925
58,706
Net revenue 888,633
799,002
30,925
58,706
Expenses
Direct cost of staffing services revenue 687,359
687,359
—
—
Cost of other revenue 75,934
—
27,735
48,199
Selling, administrative and other operating costs 126,725
107,441
10,188
9,096
Amortization of purchased intangible assets 559
50
429
80
Restructuring costs 1,959
1,234
623
102
Segment operating income (loss) (3,903 ) 2,918
(8,050 ) 1,229
Corporate general and administrative 5,237

Restatement, investigations and remediation 5,261

Operating loss $ (14,401 )


	Six Months Ended April 28, 2013											Three Months Ended February 2, 2014
(in thousands)	Total			Staffing Services		Computer Systems			Other			Total			Staffing Services			Other
Revenue
Staffing service revenue	$	951,091		$	951,091	$	—		$	—		$	392,269		$	392,269		$	—
Other revenue	88,838			—		38,978			49,860			29,359			—			29,359
Net revenue	1,039,929			951,091		38,978			49,860			421,628			392,269			29,359
Expenses
Direct cost of staffing services revenue	825,109			825,109		—			—			339,796			339,796			—
Cost of other revenue	79,626			—		34,557			45,069			24,133			—			24,133
Selling, administrative and other operating costs	140,659			120,001		11,553			9,105			60,367			55,722			4,645
Amortization of purchased intangible assets	691			24		429			238
Restructuring costs	1,688			418		1,270			—			657			657			—
Segment operating income (loss)	(7,844		)	5,539		(8,831		)	(4,552		)	(3,325		)	(3,906		)	581
Corporate general and administrative	4,670											5,232
Restatement, investigations and remediation	21,207											2,668
Operating loss	$	(33,721	)									$	(11,225	)

NOTE 12: Subsequent Events

The Company entered into an amendment dated February 20, 2015, extending its $45.0 million Short-Term Credit Facility for an additional year to March 31, 2016. The amendment adds the ability for collateral to be held in certain foreign currencies (Euro, British Pounds Sterling, and Canadian Dollars) making it more useful in natural hedging against non-United States Dollar denominated liability positions, and removes in its entirety the covenant limiting restricted payments such as stock repurchases to the greater of $5.0 million or 50% of prior year net consolidated income. Borrowings under the Short-Term Credit Facility continues to be cash collateralized.

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 should be read in conjunction with the MD&A ~~found~~included in our Form 10-K for the fiscal year ended November ~~3, 2013,~~2, 2014, as filed with the SEC on January ~~31, 2014~~20, 2015 (the ~~“2013~~“2014 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 ~~2013~~2014 Form 10-K.

Unrecognized Revenue - Non-GAAP Measures

We sometimes provide services despite a customer arrangement not yet being finalized, or continue to provide services under an expired arrangement while a renewal arrangement is being finalized. Generally Accepted Accounting Principles (“GAAP”) usually requires that services revenue be deferred until arrangements are finalized or in some cases until cash is received, which causes some periods to include the expense of providing services although the related revenue is not recognized until a subsequent period (“Unrecognized Revenue”). The discussion herein refers to financial data determined both using GAAP as well as on a non-GAAP proforma basis. The non-GAAP proforma basis includes adjustments for Unrecognized Revenue so that revenue is shown in the same period as the related services are provided. This non-GAAP financial information is used by management and provided herein primarily to provide a more complete understanding of ~~the Company’s~~our business results and trends. This non-GAAP information should not be considered an alternative for, or in isolation from, the financial information prepared and presented in accordance with GAAP. In addition, this measure may not be comparable to similarly titled measures used by other companies.

Overview

We continued our progress this quarter on our primary goal of a more highly focused and profitable Volt, and in driving our traditional staffing from a focus on topline growth to profitability. We are continuing to focus on improving Staffing Services segment operating income, particularly in our North America traditional time and materials staffing services, and reducing exposure to customers where profitability or business terms are unfavorable. This resulted in year over year revenue contraction, although we are pleased with the ongoing improvements in delivery of our staffing services that we believe will ultimately drive higher revenues at improved margins.

The ~~second~~first quarter of fiscal ~~2014~~2015 showed year-over-year improvements in operating results ~~across all of~~and net loss, with improved operating results in our Staffing Services segment and lower operating results in our Other reportable ~~segments~~

segment. Net revenue for the quarter decreased approximately 9% in total and 8% in our Staffing Service segment compared to ~~fiscal 2013.~~2014 resulting from lower demand at both our enterprise and retail customers. Average daily revenue in the Staffing Services segment decreased approximately 2% compared to the fourth quarter of 2014. This decrease was experienced broadly across our customer base.

Our GAAP operating loss in the first quarter of 2015 decreased to $7.3 million from $11.2 million in 2014, and GAAP net loss from continuing operations for the first quarter of 2015 decreased to $8.8 million from $12.7 million in 2014. Proforma operating results improved in the first quarter of 2015 to a loss of $5.0 million from $10.2 million in 2014, and proforma net loss from continuing operations improved in 2015 to $6.5 million from $11.6 million in 2014. Despite ~~an almost~~ ~~15%~~the decrease in revenue, our Staffing Services segment generated proforma operating income ~~and the direct margin percentage improved as a result~~ of actions taken in recent quarters including the divestiture of the Procurestaff business, the reorganization of our traditional staffing business and our continuing initiative to reduce exposure to customers with unprofitable business terms. Demand for traditional staffing was lower at our largest enterprise customers$1.7 million compared to ~~last year, but has increased sequentially compared to the first quarter~~a proforma operating loss of ~~2014 across most of those customers.~~

~~Operating income~~$2.8 million in ~~the second quarter of 2014 improved~~ ~~$17.5 million, ($12.4 million~~ ~~proforma) resulting from~~ ~~$6.8 million~~ ~~lower restatement, investigations and remediation costs,~~ ~~$5.7 million~~ (~~$4.5 million~~ ~~proforma) improvement from the Staffing Services segment,~~2014. This change was primarily due to ~~lower vendor management system development costs resulting from our divestiture of Procurestaff in the first quarter of 2014 and lower recruiting and indirect costs,~~ ~~$0.8 million~~ ~~improvement in the Computer Services segment primarily from lower cost of revenue in response to lower delivery and administrative costs, and~~ ~~$4.2 million~~ (~~$0.2 million~~ ~~proforma) improvement from our Other segment primarily from increased information technology infrastructure services at similar margins.~~

~~Operating results for the first six months of fiscal 2014 improved~~ ~~$19.3 million~~ ~~to a loss of~~ ~~$14.4 million~~ ~~from a loss of~~ ~~$33.7 million~~ ~~in 2013, and proforma results improved~~ ~~$16.5 million~~ ~~to a proforma loss of~~ ~~$15.2 million~~ ~~from a proforma loss of~~ ~~$31.7 million~~ ~~in 2013. The Staffing Services segment operating income~~ ~~decreased$2.6 million~~ ~~(proforma~~ ~~$0.1 million) primarily due to a multi-year indirect tax recovery in 2013, and lower direct margins offset by~~ a decrease in selling, administrative and other operating costs asof $5.1 million resulting largely from the reorganization of our traditional staffing business and the divestiture of the ProcureStaff business, and was partially offset by lower revenue, although at higher direct ~~margin and proforma direct margin improved to~~ ~~14.0%~~ ~~and~~ ~~13.9%~~ ~~from~~ ~~13.2%~~ ~~and~~ ~~13.0%~~margins. The improvement in ~~2013, respectively. Without the~~our Staffing Services segment ~~$3.0 million indirect tax recovery~~was partially offset by a decrease in ~~2013,~~ operating results ~~in the first six months would have increased~~of our Other segment of $~~0.4 million~~ ~~and proforma operating results increased~~ ~~$2.9~~1.3 million. The ~~Computer Services segment improved~~decrease occurred primarily in information technology infrastructure services as a result of non-recognition of revenue related to a customer experiencing financial difficulty. Our corporate general and administrative costs increased $~~0.7~~0.8 million primarily from ~~lower cost~~severance costs related to the departure of ~~revenue~~our current chief financial officer and costs incurred in ~~response~~connection with responding to ~~lower delivery and administrative~~activist shareholders in the first quarter of 2015, partially offset by decreased audit costs ~~and~~as the ~~Other segment improved~~ ~~$5.8 million~~ (~~$0.5 million~~ ~~proforma) primarily from increased information technology infrastructure services at similar margins.~~first quarter of 2015 only includes the completion of the fiscal 2014 audit while the first quarter of 2014 included the entire fiscal 2013 audit.

Cash generated during the first ~~six~~three months of ~~2014~~2015 from changes in operating assets and liabilities (primarily a reduction in Staffing segment accounts receivable) was ~~$31.4~~$25.5 million, offset by ~~$10.2~~$7.5 million used for operating activities resulting in net cash from operations of ~~$21.2~~$18.0 million. ~~The net cash generated from operations~~Of this amount $4.4 million was used ~~primarily~~ to reduce ~~borrowing under~~borrowings, $7.2 million was used in funding the discontinued operations of our ~~short-term financing program which is secured~~Computer Systems segment, and the majority of the remainder was held by ~~the Staffing segment accounts receivable.~~us at February 1, 2015. On ~~May 4, 2014~~February 1, 2015 we had ~~$18.2~~$15.3 million borrowing available under the short-term financing program based on current eligible collateral, and a maximum of ~~$75.0~~$85.0 million available to fund increased eligible staffing segment receivable growth.

1012

RESULTS OF CONTINUING OPERATIONS

Consolidated Results by Segment


	Three Months Ended May 4, 2014												Three Months Ended April 28, 2013												Three Months Ended February 1, 2015									Three Months Ended February 2, 2014
(in thousands)	Total			Staffing Services			Computer Systems			Other			Total			Staffing Services			Computer Systems			Other			Total			Staffing Services			Other			Total			Staffing Services			Other
Net revenue
Staffing service revenue	$	406,733		$	406,733		$	—		$	—		$	476,729		$	476,729		$	—		$	—		$	360,821		$	360,821		$	—		$	392,269		$	392,269		$	—
Other revenue	44,752			—			15,405			29,347			42,995			—			18,752			24,243			22,245			—			22,245			29,359			—			29,359
Net revenue	451,485			406,733			15,405			29,347			519,724			476,729			18,752			24,243			383,066			360,821			22,245			421,628			392,269			29,359

Expenses
Direct cost of staffing services revenue	345,899			345,899			—			—			413,116			413,116			—			—			310,819			310,819			—			339,796			339,796			—
Cost of other revenue	38,656			—			14,590			24,066			39,873			—			16,742			23,131			19,605			—			19,605			24,133			—			24,133
Selling, administrative and other operating costs	62,575			53,175			4,911			4,489			72,612			62,058			6,024			4,530			53,941			50,580			3,361			60,367			55,722			4,645
Amortization of purchased intangible assets	240			25			214			1			346			12			215			119
Restructuring costs	598			577			(81		)	102			948			133			815			—			—			—			—			657			657			—
Segment operating income (loss)	3,517			7,057			(4,229		)	689			(7,171		)	1,410			(5,044		)	(3,537		)	(1,299		)	(578		)	(721		)	(3,325		)	(3,906		)	581
Corporate general and administrative	2,279												2,380												6,023									5,232
Restatement, investigations and remediation	593												7,387												—									2,668
Operating income (loss)	645												(16,938		)
Operating loss																									(7,322		)							(11,225		)
Other income (expense), net	(1,762		)										60												(99		)							(410		)
Income tax provision	2,378												583												1,379									1,047
Net loss	$	(3,495	)										$	(17,461	)
Net loss from continuing operations																									$	(8,800	)							$	(12,682	)

NON-GAAP PROFORMA

	Three Months Ended May 4, 2014												Three Months Ended April 28, 2013												Three Months Ended February 1, 2015									Three Months Ended February 2, 2014
(in thousands)	Total			Staffing Services			Computer Systems			Other			Total			Staffing Services			Computer Systems			Other			Total			Staffing Services			Other			Total			Staffing Services			Other
Net revenue	$	451,485		$	406,733		$	15,405		$	29,347		$	519,724		$	476,729		$	18,752		$	24,243		$	383,066		$	360,821		$	22,245		$	421,628		$	392,269		$	29,359
Recognition of previously unrecognized revenue	(6,348		)	(6,190		)	—			(158		)	(8,632		)	(8,632		)	—			—			(2,630		)	(2,568		)	(62		)	(5,248		)	(5,048		)	(200		)
Additions to unrecognized revenue	4,549			4,537			—			12			11,969			8,164			—			3,805			4,912			4,873			39			6,293			6,160			133
Net non-GAAP proforma adjustment	(1,799		)	(1,653		)	—			(146		)	3,337			(468		)	—			3,805			2,282			2,305			(23		)	1,045			1,112			(67		)

Non-GAAP proforma net revenue	449,686			405,080			15,405			29,201			523,061			476,261			18,752			28,048			385,348			363,126			22,222			422,673			393,381			29,292

Expenses
Direct cost of staffing services revenue	345,899			345,899			—			—			413,116			413,116			—			—			310,819			310,819			—			339,796			339,796			—
Cost of other revenue	38,656			—			14,590			24,066			39,873			—			16,742			23,131			19,605			—			19,605			24,133			—			24,133
Selling, administrative and other operating costs	62,575			53,175			4,911			4,489			72,612			62,058			6,024			4,530			53,941			50,580			3,361			60,367			55,722			4,645
Amortization of purchased intangible assets	240			25			214			1			346			12			215			119
Restructuring costs	598			577			(81		)	102			948			133			815			—			—			—			—			657			657			—
Non-GAAP proforma segment operating income (loss)	1,718			5,404			(4,229		)	543			(3,834		)	942			(5,044		)	268			983			1,727			(744		)	(2,280		)	(2,794		)	514

Corporate general and administrative																									6,023									5,232
Restatement, investigations and remediation																									—									2,668
Non-GAAP proforma operating loss	(1,154		)										(13,601		)										(5,040		)							(10,180		)

Non-GAAP proforma net loss	$	(5,294	)										$	(14,124	)
Other income (expense), net																									(99		)							(410		)
Income tax provision																									1,379									1,047
Non-GAAP proforma net loss from continuing operations																									$	(6,518	)							$	(11,637	)

1113

Consolidated Results of Operations ~~(Q2 2014~~(Q1 2015 vs. ~~Q2 2013)~~Q1 2014)

Net revenue: Net revenue in the ~~second~~first quarter of fiscal ~~2014~~2015 decreased ~~$68.2~~$38.5 million to ~~$451.5~~$383.1 million, from ~~$519.7~~$421.6 million in fiscal ~~2013,~~2014, and proforma net revenue decreased ~~$73.4~~$37.4 million, or ~~14.0%~~8.8%, to ~~$449.7~~$385.3 million, from ~~$523.1~~$422.7 million in fiscal ~~2013.~~2014. The ~~change~~decrease in revenue was the result of decreased Staffing Services revenues of ~~$70.0~~$31.5 million (proforma of ~~$71.2 million)~~$30.3 million or 7.7%) resulting from ~~fewer contingent workers on assignment primarily~~lower demand at both our ~~largest~~ enterprise and retail customers, ~~where current demand levels are lower than in the prior year,~~ our ~~exit of certain~~continuing initiative to reduce exposure to customers ~~as part of our continued focus on exiting or reducing business levels~~ with ~~customers where profitability or~~unfavorable business terms, ~~are unfavorable,~~ and with respect to GAAP results $1.2 million ~~lower~~higher net staffing Unrecognized Revenue. In addition, Computer Systems revenues decreased $3.4 million from lower directory assistance software services revenue resulting from approximately 13% lower transaction volumes at slightly lower rates and lower maintenance and system revenue, while sales of our full-featured call center software (“OnDemand”) were flat. These decreases were partially offset by higher information technology infrastructure services revenue driven primarily by a $3.8 million deferral of revenue in 2013.

Direct cost of staffing services revenue: Direct cost of ~~Staffing Services~~staffing services revenue in the ~~second~~first quarter of ~~2014~~2015 decreased ~~$67.2~~$29.0 million, or ~~16.3%~~8.5%, to ~~$345.9~~$310.8 million from ~~$413.1~~$339.8 million in ~~2013.~~2014. This decrease was primarily the result of fewer contingent staff on assignment ~~and lower managed service program costs~~ consistent with the ~~related~~ decrease in ~~revenues.~~revenues and to a lesser extent improved margins. Direct margin of Staffing Services revenue as a percent of staffing revenue and proforma staffing revenue in ~~2014~~2015 was ~~15.0%~~13.9% and ~~14.6%~~14.4%, respectively, from ~~13.3% for both~~13.4% and 13.6% in ~~2013.~~2014. The direct margin and proforma direct margin percentage increased by ~~1.3%~~0.8% primarily due to ~~higher traditional staffing margins.~~improvements in our project-based and managed service programs. The increase in the GAAP direct margin percentage included ~~an additional 0.4%~~a 0.3% impact due to ~~lower~~higher net staffing Unrecognized Revenue in the ~~second~~first quarter of ~~2014~~2015 from ~~2013.~~2014.

Cost of other revenue: Cost of other revenue in the ~~second~~first quarter of ~~2014~~2015 decreased ~~$1.2~~$4.5 million, or ~~3.1%~~18.8%, to ~~$38.7~~$19.6 million from ~~$39.9~~$24.1 million in ~~2013.~~2014. This decrease was primarily a result of ~~Computer Systems segment~~ lower ~~delivery~~ costs ~~in response~~related to lower ~~directory assistance revenue, while costs of our call center revenue increased slightly and continued at negative margins. This decrease was partially offset by increased costs for our~~ information technology infrastructure services and telecommunications infrastructure and security services revenues, although at ~~similar margins and~~a lower margin percentage primarily ~~due~~related to ~~higher volume.~~the non-recognition of revenue related to a customer experiencing financial difficulty.

Selling, administrative and other operating costs: Selling, administrative and other operating costs in the ~~second~~first quarter of ~~2014~~2015 decreased ~~$10.0~~$6.5 million, or ~~13.8%~~10.6%, to ~~$62.6~~$53.9 million from ~~$72.6~~$60.4 million in ~~2013~~2014 primarily due to ~~$8.2 million~~ lower traditional staffing recruiting and ~~indirect~~delivery costs, ~~in response to lower revenue~~ and ~~restructuring, $1.8 million~~ lower vendor management system development costs resulting from the divestiture of ~~Procurestaff~~ProcureStaff in the first quarter of ~~2014,~~2014.

Corporate general and ~~$1.3 million lower~~administrative costs: Corporate general and administrative costs increased $0.8 million, or 15.1%, to $6.0 million from $5.2 millionin 2014 primarily from severance costs related to the departure of our ~~Computer Systems segment,~~current chief financial officer and costs incurred in connection with responding to activist shareholders in the first quarter of 2015, partially offset by ~~increases in other selling, administrative and other operating costs.~~

~~Restructuring~~decreased audit costs~~: Restructuring costs in~~ as the ~~second~~first quarter of 2015 only includes the completion of the fiscal 2014 audit while the first quarter of 2014 ~~were primarily comprised of workforce reductions in our Staffing Services segment in North America in response to lower revenue levels and our traditional staffing services reorganization.~~

~~Restructuring costs in~~included the ~~second quarter of~~entire fiscal 2013 ~~were primarily comprised of workforce reductions in our Computer Systems segment in response to declining directory assistance revenue.~~audit.

Restatement, investigations and remediation: ~~Costs~~Restatement, investigations and remediation costs incurred in the ~~second~~first quarter of 2014 ~~amounted to $0.6 million compared to $7.4 million in 2013. The decreased costs~~ were a result of financial and legal consulting for the ~~substantial~~ completion of the ~~restatement~~financial audits for fiscal years 2011 and 2012.

Operating loss: Operating loss in ~~the second quarter of 2013 and completion of delayed filings during~~ the first quarter of 2015 improved to $7.3 million from $11.2 million in 2014, and our proforma operating loss improved to $5.0 million from $10.2 million in 2014.

~~Operating~~ Despite the decrease in revenue, our Staffing Services segment operating income ~~(loss): Operating income~~and direct margin rate improved as a result of actions taken in recent quarters including the ~~second quarter~~reorganization of ~~2014~~our traditional staffing business, the divestiture of ~~$0.6 million results from~~ the ~~above reasons and included~~ProcureStaff business, our continuing initiative to reduce exposure to customers with unfavorable business terms. No restatement, investigations and remediation costs were incurred in the first quarter of ~~$0.6~~2015 compared to $2.7 million ~~and restructuring costs~~in the first quarter of ~~$0.9~~2014. These improvements were offset by a decline in operating results in our Other segment of $1.3 million ($0.3 million reflected in corporate general and administrative) as we reduced headcount in response to lower revenue levels and our staffing segment reorganization. Excluding these items we would have had operating income of $2.1 million and a proforma income of $0.3 million.primarily from information technology infrastructure services.

Operating loss in the ~~second~~first quarter of ~~2013~~2014 of ~~$16.9~~$11.2 million included restatement, investigations and remediation costs of ~~$7.4~~$2.7 million, and restructuring costs of ~~$0.9~~$0.7 million as we reduced headcount in response to lower revenue levels. Without these items we would have had an operating loss of ~~$8.6~~$7.8 million and a proforma operating loss of ~~$5.3~~$6.8 million.

Other income (expense), net: Other expense in the ~~second~~first quarter of ~~2014 increased $1.9~~2015 decreased $0.3 million to ~~$1.8~~$0.1 million from ~~income of $0.1~~$0.4 million in ~~2013,~~2014, primarily related to ~~non-cash foreign exchange gains and losses on intercompany balances.~~a decrease in interest expense from lower outstanding borrowings.

Income tax provision: Income tax provision was ~~$2.4~~$1.4 million compared to ~~$0.6~~a provision of $1.0 million in the ~~second~~first quarter of ~~2014~~2015 and ~~2013,~~2014, respectively. The provision in both periods primarily related to locations outside of the United States.

1214

Results of Operations by Segment ~~(Q2 2014~~(Q1 2015 vs. ~~Q2 2013)~~Q1 2014)

Staffing Services

Net revenue: The segment’s net revenue in the ~~second~~first quarter of fiscal ~~2014~~2015 decreased ~~$70.0~~$31.5 million to ~~$406.7~~$360.8 million from ~~$476.7~~$392.3 million in fiscal ~~2013,~~2014, and proforma net revenue decreased ~~$71.2~~$30.3 million, or ~~14.9%~~7.7%, to ~~$405.1~~$363.1 million from ~~$476.3~~$393.4 million in ~~2013.~~2014. This decrease ~~is due~~was from lower demand at both our enterprise and retail customers, our continuing initiative to ~~fewer contingent workers on assignment primarily at our largest enterprise~~reduce exposure to customers ~~where current demand levels are lower than in the prior year, our exit of certain customers as part of our continued focus on exiting or reducing~~with unfavorable business ~~levels with customers where profitability or business~~ terms ~~are unfavorable,~~ and with respect to GAAP results $1.2 million ~~lower~~higher net staffing Unrecognized Revenue.

Direct cost of staffing services revenue: ~~The segment's direct~~Direct cost of ~~Staffing Services~~staffing services revenue in the ~~second~~first quarter of ~~2014~~2015 decreased ~~$67.2~~$29.0 million, or ~~16.3%~~8.5%, to ~~$345.9~~$310.8 million from ~~$413.1~~$339.8 million in ~~2013.~~2014. This decrease was primarily the result of fewer contingent staff on assignment ~~and lower managed service program costs~~ consistent with the ~~related~~ decrease in ~~revenues.~~revenues and to a lesser extent improved margins. Direct margin of Staffing Services revenue as a percent of staffing revenue and proforma staffing revenue in ~~2014~~2015 was ~~15.0%~~13.9% and ~~14.6%~~14.4%, respectively, from ~~13.3% for both~~13.4% and 13.6% in ~~2013.~~2014. The direct margin and proforma direct margin percentage increased by ~~1.3%~~0.8% primarily due to ~~higher traditional staffing margins.~~improvements in our project- based and managed service programs. The increase in the GAAP direct margin percentage included ~~an additional 0.4%~~a 0.3% impact ~~due to lower net staffing Unrecognized Revenue in the second quarter of 2014 from 2013.~~

~~Selling, administrative and other operating costs~~: The segment’s selling, administrative and other operating costs in the second quarter of 2014 decreased $8.9 million, or 14.3%, to $53.2 million from $62.1 million in 2013, primarily due to $8.2 million lower traditional staffing recruiting and indirect costs in response to the lower revenue and restructuring and $1.8 million lower vendor management system development costs resulting from the divestiture of Procurestaff in the first quarter of 2014, partially offset by increases in other selling, administrative and other operating costs. As a percent of staffing revenue and proforma staffing revenue these costs were 13.1% for both in the second quarter of 2014 and 13.0% for both in the second quarter of 2013.

~~Restructuring costs~~: Restructuring costs in the second quarter of 2014 were primarily comprised of workforce reductions in response to lower revenue levels and our traditional staffing services reorganization. Restructuring costs in the second quarter of 2013 were in connection with our focus on achieving acceptable operating income from our traditional time and materials staffing services in North America and exiting or reducing business levels with customers where profitability or business terms were unfavorable.

~~Segment operating income~~: The segment’s operating income in the second quarter of 2014 increased by $5.7 million to $7.1 million from $1.4 million in 2013, and proforma operating income increased $4.5 million to $5.4 million from $0.9 million in 2013. The increase in operating income is primarily due to a decrease in selling, administrative and other operating costs of $8.9 million in response to the decline in traditional staffing revenues and reorganization of our North American staffing operations, partially offset by lower direct margins of $4.0 million.

~~Computer Systems~~

~~Net revenue~~: The segment’s net revenue in the second quarter of fiscal 2014 decreased $3.4 million, or 17.8%, to $15.4 million from $18.8 million in fiscal 2013. This decrease was primarily the result of approximately 13% lower transaction volumes at slightly lower rates and lower maintenance and system revenue, while sales of our full-featured call center software ("OnDemand") were flat.

~~Cost of other revenue~~: The segment’s cost of other revenue in the second quarter of 2014 decreased $2.1 million, or 12.9%, to $14.6 million from $16.7 million in 2013. This decrease was primarily a result of lower delivery costs in response to lower directory assistance revenue, while costs of our call center revenue increased slightly and continued at negative margins.

~~Selling, administrative and other operating costs~~: The segment’s selling, administrative and other operating costs in the second quarter of 2014 decreased $1.1 million, or 18.5%, to $4.9 million from $6.0 million in 2013. This decrease resulted from lower administrative costs in response to decreased business levels offset by higher selling costs as we increased efforts to sell our full-featured call center software ("OnDemand").

~~Restructuring costs~~: Restructuring costs in the second quarter of 2013 were comprised of headcount reduction severance costs in North America, the United Kingdom and Germany due to the continued decline in the directory assistance business both domestically and internationally.

~~Segment operating loss~~: The segment’s operating loss in the second quarter of 2014 decreased $0.8 million, or 16.2%, to $4.2 million from $5.0 million in 2013. The decrease in operating loss resulted primarily from the impact of the segment's restructuring activities and lower administrative costs.

~~Other~~

~~Net revenue~~: The segment’s net revenue in the second quarter of fiscal 2014 increased $5.1 million, to $29.3 million from $24.2 million in fiscal 2013, and proforma net revenue increased by $1.2 million, or 4.1%, to $29.2 million from $28.0 million in 2013. The increase is primarily due to information technology infrastructure services higher revenue driven primarily by a $3.8 million deferral of revenue in 2013, and by new customers and to a lesser extent from net expanded business with existing customers.

~~Cost of other revenue~~: The segment’s cost of other revenue in the second quarter of 2014 increased $1.0 million, or 4.0%, to $24.1 million from $23.1 million in 2013. The increase is primarily in response to higher information technology infrastructure services volume.

~~Selling, administrative and other operating costs: The segment’s selling, administrative and other operating costs remained consistent at $4.5 million in the second quarter of 2014 and 2013.~~

~~Segment operating income (loss)~~: The segment’s operating results in the second quarter of 2014 increased $4.2 million to income of $0.7 million from a loss of $3.5 million in 2013, and proforma operating income increased $0.2 million to $0.5 million from $0.3 million in 2013, primarily due to increased information technology infrastructure services at similar margins.

Six Months Ended May 4, 2014 Six Months Ended April 28, 2013
(in thousands) Total Staffing Services Computer Systems Other Total Staffing Services Computer Systems Other
Net revenue
Staffing service revenue $ 799,002
$ 799,002
$ —
$ —
$ 951,091
$ 951,091
$ —
$ —
Other revenue 89,631
—
30,925
58,706
88,838
—
38,978
49,860
Net revenue 888,633
799,002
30,925
58,706
1,039,929
951,091
38,978
49,860
Expenses
Direct cost of staffing services revenue 687,359
687,359
—
—
825,109
825,109
—
—
Cost of other revenue 75,934
—
27,735
48,199
79,626
—
34,557
45,069
Selling, administrative and other operating costs 126,725
107,441
10,188
9,096
140,659
120,001
11,553
9,105
Amortization of purchased intangible assets 559
50
429
80
691
24
429
238
Restructuring costs 1,959
1,234
623
102
1,688
418
1,270
—
Segment operating income (loss) (3,903 ) 2,918
(8,050 ) 1,229
(7,844 ) 5,539
(8,831 ) (4,552 )
Corporate general and administrative 5,237
4,670

Restatement, investigations and remediation 5,261
21,207

Operating loss (14,401 ) (33,721 )
Other income (expense), net (2,741 ) 329

Income tax provision 3,427
1,159

Net loss $ (20,569 ) $ (34,551 )

NON-GAAP PROFORMA

Six Months Ended May 4, 2014 Six Months Ended April 28, 2013
(in thousands) Total Staffing Services Computer Systems Other Total Staffing Services Computer Systems Other
Net revenue $ 888,633
$ 799,002
$ 30,925
$ 58,706
$ 1,039,929
$ 951,091
$ 38,978
$ 49,860
Recognition of previously unrecognized revenue (5,300 ) (5,075 ) —
(225 ) (11,115 ) (11,115 ) —
—
Additions to unrecognized revenue 4,545
4,533
—
12
13,151
8,105
—
5,046
Net non-GAAP proforma adjustment (755 ) (542 ) —
(213 ) 2,036
(3,010 ) —
5,046

Non-GAAP proforma net revenue 887,878
798,460
30,925
58,493
1,041,965
948,081
38,978
54,906

Expenses
Direct cost of staffing services revenue 687,359
687,359
—
—
825,109
825,109
—
—
Cost of other revenue 75,934
—
27,735
48,199
79,626
—
34,557
45,069
Selling, administrative and other operating costs 126,725
107,441
10,188
9,096
140,659
120,001
11,553
9,105
Amortization of purchased intangible assets 559
50
429
80
691
24
429
238
Restructuring costs 1,959
1,234
623
102
1,688
418
1,270
—
Non-GAAP proforma segment operating income (loss) (4,658 ) 2,376
(8,050 ) 1,016
(5,808 ) 2,529
(8,831 ) 494

Non-GAAP proforma operating loss (15,156 ) (31,685 )

Non-GAAP proforma net loss $ (21,324 ) $ (32,515 )

~~Consolidated Results of Operations (Q2 2014 YTD vs. Q2 2013 YTD)~~

~~Net revenue~~: Net revenue in the first six months of fiscal 2014 decreased $151.3 million to $888.6 million from $1,039.9 million in fiscal 2013, and proforma net revenue decreased $154.1 million, or 14.8%, to $887.9 million from $1,042.0 million in 2013. The change in revenue was the result of decreased Staffing Services revenues of $152.1 million (proforma of $149.6 million) resulting from fewer contingent workers on assignment primarily at our largest enterprise customers where demand levels are lower than in the prior year, our exit of certain customers as part of our continued focus on exiting or reducing business levels with customers where profitability or business terms are unfavorable, and with respect to GAAP results $2.5 million higher net staffing Unrecognized Revenue. In addition, Computer Systems revenues decreased $8.1 million from several large directory assistance implementations reaching the end of the maintenance periods over which the projects were being amortized, approximately 23% lower transaction volumes, and lower pricing and maintenance levels. These decreases were partially offset by higher information technology infrastructure services revenue driven primarily by a $5.0 million deferral of revenue in 2013, and by new customers and to a lesser extent from net expanded business with existing customers.

~~Direct cost of staffing services revenue~~: Direct cost of Staffing Services revenue in the first six months of 2014 decreased $137.7 million, or 16.7%, to $687.4 million from $825.1 million in 2013. This decrease was primarily the result of fewer contingent staff on assignment, and lower managed service program costs consistent with the related decrease in revenues. Direct margin of Staffing Services revenue as a percent of staffing revenue and proforma staffing revenue in 2014 was 14.0% and 13.9% from 13.2% and 13.0% in 2013, respectively. The direct and proforma margin percentage increased by 0.9% primarily due to higher traditional staffing margins. This increase was offset by a 0.1% decrease in the GAAP direct margin percentage due to higher net staffing Unrecognized Revenue in the first ~~six months of 2014 from 2013.~~

~~Cost of other revenue~~: Cost of other revenue in the first six months of 2014 decreased $3.7 million, or 4.6%, to $75.9 million from $79.6 million in 2013. This decrease was primarily a result of Computer Systems segment lower delivery costs in response to lower directory assistance revenue, restructuring activities, and decreased data acquisition costs, while costs of our call center software ("OnDemand") increased slightly and continued at negative margins. This decrease was partially offset by increased costs for our information technology infrastructure services at similar margins and primarily due to higher volume.

~~Selling, administrative and other operating costs~~: Selling, administrative and other operating costs in the first six months of 2014 decreased $14.0 million, or 9.9%, to $126.7 million from $140.7 million in 2013 due to $15.9 million lower traditional staffing recruiting and indirect costs in response to the lower revenue and restructuring, $2.8 million lower vendor management system development costs resulting from the divestiture of Procurestaff in the first quarter of 2014, $1.9 million lower administrative costs in our Computer Systems segment, partially offset by increases in other selling, administrative and other operating costs. The first six months of 2013 included a $3.0 million indirect tax recovery related to multiple years. Adjusting for the indirect tax recovery, selling, administrative and other operating costs would have decreased $17.0 million, or 11.8%.

~~Restructuring costs: Restructuring costs in the first six months of 2014 were primarily comprised of workforce reductions in our Staffing Services segment resulting~~2015 from ~~our divestiture of Procurestaff and our traditional staffing restructuring and lower revenue in our Computer Systems segment in response to declining directory assistance revenue.~~

Restructuring costs in the first six months of 2013 were comprised of workforce reductions in our Computer Systems and Staffing Services segments in response to lower revenue and our focus on achieving acceptable operating income from our traditional time and materials staffing services in North America and exiting or reducing business levels with customers where profitability or business terms are unfavorable.

~~Restatement, investigations and remediation:~~ Costs in the first six months of 2014 amounted to $5.3 million compared to $21.2 million in 2013. The decreased costs were a result of the substantial completion of the restatement in the second quarter of 2013 and completion of delayed filings during the first quarter of 2014.

~~Operating loss~~: Operating loss in the first six months of 2014 of $14.4 million results from the above reasons and included restatement, investigations and remediation costs of $5.3 million and restructuring costs of $2.3 million ($0.3 million reflected in corporate general and administrative) primarily in our Staffing Services segment in connection with workforce reductions in response to lower revenue levels and our staffing segment reorganization and the sale of our vendor management system assets and the continued decline in the directory assistance business within the Computer Systems business, and with respect to GAAP results $2.8 million lower Unrecognized Revenue between 2014 and 2013. Excluding these items we would have had an operating loss of $6.8 million and a proforma loss of $7.6 million.

Operating loss in the first six months of 2013 of $33.7 million included restatement, investigations, and remediation costs of $21.2 million, a $3.0 million indirect tax recovery related to multiple years, and restructuring costs of $1.7 million. Without these items we would have had an operating loss of $13.8 million and a proforma operating loss of $11.8 million.

~~Other income (expense), net~~: Other expense in the first six months of 2014 increased $3.0 million to $2.7 million from income of $0.3 million in 2013, primarily related to non-cash foreign exchange gains and losses on intercompany balances.

~~Income tax provision~~: Income tax provision was $3.4 million compared to $1.2 million in the first six months of 2014 and 2013, respectively. The provision in both periods primarily related to locations outside of the United States.

~~Results of Operations by Segment (Q2 2014 YTD vs. Q2 2013 YTD)~~

~~Staffing Services~~

~~Net revenue~~: The segment’s net revenue in the first six months of fiscal 2014 decreased $152.1 million to $799.0 million from $951.1 million in fiscal 2013, and proforma net revenue decreased $149.6 million, or 15.8%, to $798.5 million from $948.1 million in 2013. This decrease is due to fewer contingent workers on assignment primarily at our largest enterprise customers where current demand levels are lower than in the prior year, our exit of certain customers as part of our continued focus on exiting or reducing business levels with customers where profitability or business terms are unfavorable, and with respect to GAAP results $2.5 million higher net staffing Unrecognized Revenue.

~~Direct cost of staffing services revenue~~: The segment's direct cost of Staffing Services revenue in the first six months of 2014 decreased $137.7 million, or 16.7%, to $687.4 million from $825.1 million in 2013. This decrease was primarily the result of fewer contingent staff on assignment, and lower managed service program costs consistent with the related decrease in revenues. Direct margin of Staffing Services revenue as a percent of staffing revenue and proforma staffing revenue in 2014 was 14.0% and 13.9% from 13.2% and 13.0% in 2013, respectively. The direct and proforma margin percentage increased by 0.9% primarily due to higher traditional staffing margins. This increase was offset by a 0.1% decrease in the GAAP direct margin percentage due to higher net staffing Unrecognized Revenue in the first six months of fiscal 2014 from 2013.

Selling, administrative and other operating costs: The segment’s selling, administrative and other operating costs in the first ~~six months~~quarter of ~~2014~~2015 decreased ~~$12.6~~$5.1 million, or ~~10.5%~~9.2%, to ~~$107.4~~$50.6 million from ~~$120.0~~$55.7 million in ~~2013~~2014, primarily due to ~~$15.9 million~~ lower traditional staffing recruiting and ~~indirect~~delivery costs primarily from the restructuring activities in ~~response to the lower revenue~~previous quarters, and ~~restructuring and $2.8 million~~ lower vendor management system development costs resulting from the divestiture of ~~Procurestaff~~ProcureStaff in the first quarter of 2014. As a percent of staffing revenue and proforma staffing revenue these costs were 14.0% and 13.9%, respectively, in the first ~~six months~~quarter of ~~2014 these costs were 13.4%~~2015 and ~~13.5% from 12.6% and 12.7%~~14.2% for both in ~~2013, respectively. The~~the first quarter of 2013 included a $3.0 million indirect tax recovery related to multiple years. Adjusting for the indirect tax recovery, the segment’s selling, administrative and other operating costs would have decreased $15.6 million, or 12.7%.

~~Restructuring costs~~: Restructuring costs in the first six months of 2014 were primarily comprised of workforce reductions resulting from our divestiture of Procurestaff and our traditional staffing restructuring and lower revenue. Restructuring costs in the first six months of 2013 were in connection with our focus on achieving acceptable operating income from our traditional time and materials staffing services in North America and exiting or reducing business levels with customers where profitability or business terms are unfavorable.2014.

Segment operating income (loss): The segment’s operating ~~income~~loss in the first ~~six months~~quarter of ~~2014~~2015 decreased ~~by $2.6~~$3.3 million to ~~$2.9~~$0.6 million from ~~$5.5~~$3.9 million in ~~2013,~~2014, and proforma operating ~~income decreased $0.1~~results increased $4.5 million to ~~$2.4~~operating income of $1.7 million from ~~$2.5~~an operating loss of $2.8 million in ~~2013.~~2014. The ~~decrease~~increase in operating ~~income~~results is primarily due to ~~lower direct margins of $14.4 million ($11.9 million proforma) and a $3.0 million indirect tax recovery in 2013 related to multiple years, partially offset by~~ a decrease in selling, administrative and other operating costs of ~~$15.6~~$5.1 million, primarily resulting from actions taken in recent quarters including the reorganization of our ~~North American staffing operations and in response to the decline in~~ traditional staffing ~~revenues. Without~~business, the ~~2013 indirect tax recovery, operating income in~~divestiture of the ~~first six months would have been an increase of~~ ~~$0.4 million~~ProcureStaff business, and ~~proforma operating income an increase of~~ ~~$2.9 million~~.our continuing initiative to reduce exposure to customers with unfavorable business terms, partially offset by lower direct margins.

~~Computer Systems~~Other

Net revenue: The segment’s net revenue in the first ~~six months~~quarter of fiscal ~~2014~~2015 decreased ~~$8.1~~$7.2 million, ~~or 20.7%,~~ to ~~$30.9~~$22.2 million from ~~$39.0~~$29.4 million in fiscal ~~2013.~~2014, and proforma net revenue decreased by $7.1 million, or 24.1%, to $22.2 million from $29.3 million in 2014. This decrease ~~was~~is primarily due to decreased information technology infrastructure services revenue primarily from lower volume of business resulting from a large non-recurring project in the ~~result~~first quarter of ~~several large directory assistance implementations reaching~~2014 and non-recognition of revenue related to a customer experiencing financial difficulty as well as lower telecommunications infrastructure and security services revenue as we exited the ~~end~~telecommunications government solution business during the second quarter of ~~the maintenance periods over which the projects were being amortized, approximately 23% lower transaction volumes, and lower pricing and maintenance levels.~~2014.

Cost of other revenue: The segment’s cost of other revenue in the first ~~six months~~quarter of ~~2014~~2015 decreased ~~$6.9~~$4.5 million, or ~~19.7%~~18.8%, to ~~$27.7~~$19.6 million from ~~$34.6~~$24.1 million in ~~2013. This~~2014. The decrease was primarily a result of $7.9 million lower delivery costs in response to lower directory assistance revenue, while costs of our call center software (“OnDemand”) increased slightly and continued at negative margins.

~~Selling, administrative and other operating costs~~: The segment’s selling, administrative and other operating costs in the first six months of 2014 decreased $1.4 million, or 11.8%, to $10.2 million from $11.6 million in 2013. This decrease resulted primarily from $1.9 million lower administrative costs in response to decreased business levels offset by $0.8 million higher selling costs as we increased efforts to sell our full-featured call center software ("OnDemand").

~~Restructuring costs~~: Restructuring costs in the first six months of 2014 was comprised of workforce reduction severance costs in response to lower revenue. Restructuring costs in the first six months of 2013 were comprised of headcount reduction severance costs in North America, the United Kingdom and Germany due to the continued decline in the directory assistance business both domestically and internationally.

~~Segment operating loss~~: The segment’s operating loss in the first six months of 2014 decreased $0.7 million, or 8.8%, to $8.1 million from $8.8 million in 2013. This decrease was primarily from lower revenues and related lower costs, offset by our increased sales efforts related to our full-featured call center software ("OnDemand").

~~Other~~

~~Net revenue~~: The segment’s net revenue in the first six months of fiscal 2014 increased $8.8 million, to $58.7 million from $49.9 million in fiscal 2013, and proforma net revenue increased by $3.6 million, or 6.5%, to $58.5 million from $54.9 million in 2013. The increase is primarily due to lower costs of servicing the lower information technology infrastructure services ~~including~~and telecommunications infrastructure and security services revenues, although at a ~~$5.0 million deferral~~lower margin percentage primarily related to the non-recognition of revenue ~~in the first six months of 2013, and by new customers and~~related to a ~~lesser extent from net expanded business with existing customers.~~

~~Cost of other revenue~~: The segment’s cost of other revenue in the first six months of 2014 increased $3.1 million, or 6.9%, to $48.2 million from $45.1 million in 2013. The increase is primarily in response to higher information technology infrastructure services volume.customer experiencing financial difficulty.

Selling, administrative and other operating costs: The segment’s selling, administrative and other operating costs ~~remained consistent at $9.1~~decreased $1.2 million to $3.4 million in the first ~~six months~~quarter of 2015 from $4.6 million in 2014, primarily from reductions in our telecommunications infrastructure and ~~2013.~~security services resulting from our exit of the telecommunications government solution business.

Segment operating income (loss): The segment’s operating results in the first ~~six months~~quarter of ~~2014 increased $5.8~~2015 decreased $1.3 million to an operating loss of $0.7 million from operating income of ~~$1.2 million from a loss of $4.6~~$0.6 million in ~~2013, and proforma operating income increased $0.5 million to $1.0 million from $0.5 million in 2013,~~2014 primarily due to ~~increased~~lower margins partially offset by lower selling, administrative and other operating costs in our information technology infrastructure services ~~at similar margins.~~and telecommunications infrastructure and security services.

~~FINANCIAL CONDITION~~

~~CASH FLOWS~~LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash flows from operations and proceeds from short-term financing and credit facilities. When working capital needs grow we tend to use cash and cash equivalents available and then access our short-term financing program. We maintain a borrowing level under our short-term financing program at no less than 80% of our borrowing capacity as the low interest rate enhances returns to shareholders. We believe that our available cash and our existing short-term financing program and credit facility are sufficient to cover our cash needs for the foreseeable future.

Cash flows from operating, investing and financing activities, as reflected in our Condensed Consolidated Statements of Cash Flows, are summarized in the following table:


	Six Months Ended						Three Months Ended
(in thousands)	May 4, 2014			April 28, 2013			February 1, 2015			February 2, 2014
Net cash provided by (used in) operating activities	$	21,181		$	(389	)
Net cash provided by operating activities							$	18,039		$	24,266
Net cash provided by (used in) investing activities	1,086			(3,885		)	(772		)	2,157
Net cash provided by (used in) financing activities	(17,033		)	13,888
Net cash used in financing activities							(4,530		)	(22,532		)
Effect of exchange rate changes on cash and cash equivalents	204			(187		)	402			176
Net cash used in discontinued operations							(7,237		)	(1,830		)
Net increase in cash and cash equivalents	$	5,438		$	9,427		$	5,902		$	2,237

Cash Flows - Operating Activities

The net cash provided by operating activities in the ~~six~~first three months ended ~~May 4, 2014~~February 1, 2015 was ~~$21.2~~$18.0 million, ~~($25.4~~a decrease of $6.3 million from net cash provided by operating activities ~~offset by $4.2~~of $24.3 million in connection with the restatement, investigations and remediation costs), an increase of $21.6 million from net cash used in operating activities of $0.4 million ($23.1 million provided by operating activities offset by $23.5 million in connection with the restatement, investigations and remediation costs) in 2013.2014.

The net cash used in operating activities in the ~~six~~first three months ended ~~May 4,~~February 1, 2015, exclusive of changes in operating assets and liabilities, was $7.5 million; the net loss from continuing operations of $8.8 million included non-cash charges for depreciation and amortization of $1.8 million. The cash used in operating activities in the first three months ended February 2, 2014, exclusive of changes in operating assets and liabilities, was ~~$10.2~~$10.0 million; the net loss from continuing operations of ~~$20.6~~$12.7 million included non-cash charges for depreciation and amortization of $7.0 million, unrealized foreign exchange loss of $1.8 million and deferred taxes of $1.4 million. The cash used in operating activities in the six months ended April 28, 2013, exclusive of changes in operating assets and liabilities was $29.8 million; the net loss of $34.6 million

~~included non-cash charges for depreciation and amortization of $7.8 million, offset by a deferred income tax benefit of $2.0 million and unrealized foreign currency exchange gain of $1.5~~$2.6 million. Cash provided by changes in operating assets and liabilities in the ~~six~~three months ended ~~May 4, 2014~~February 1, 2015 was ~~$31.4~~$25.5 million, net, principally due to the decrease in the level of accounts receivable of ~~$41.0~~$32.2 million, restricted cash related to customer contracts of $4.3 million and prepaid insurance and other assets of ~~$7.2~~$1.3 million, offset by decreases in the level of ~~accrued expenses of $12.9 million and~~ accounts payable of ~~$3.9~~$7.3 million and accrued expenses and other liabilities of $4.9 million. Cash provided by changes in operating assets and liabilities in the ~~six~~first three months ended ~~April 28, 2013~~February 2, 2014 was ~~$29.4~~$34.2 million, net, principally due to the decrease in the level of accounts receivable of ~~$41.7~~$42.1 million, prepaid insurance and other assets of $5.4 million and restricted cash related to customer contracts of ~~$8.1~~$1.3 million, offset by decreases in accounts payable of ~~$10.5~~$8.3 million, ~~prepaid insurance~~accrued expenses and other ~~assets~~liabilities of ~~$8.0~~$4.5 million and income taxes of ~~$4.3~~$1.8 million.

Cash Flows - Investing Activities

The net cash used in investing activities in the first three months ended February 1, 2015 was $0.8 million, principally from purchases of property, equipment and software of $1.2 million, partially offset by $0.3 million for the sale of investments, net of purchases. The net cash provided by investing activities in the first ~~six~~three months ~~of fiscal~~ended February 2, 2014 was ~~$1.1~~$2.2 million, principally from ~~the~~ proceeds from the sale of property, equipment and software ~~related assets~~ of $3.0 million, partially offset by ~~the purchases of property, equipment and software of $2.6 million. The net cash used in investing activities in the first six months of fiscal 2013 was $3.9 million, principally from~~ the purchase of property, equipment and software of ~~$4.2~~$1.3 million.

Cash Flows - Financing Activities

The net cash used in financing activities in the ~~six~~first three months ended ~~May 4, 2014~~February 1, 2015 was ~~$17.0~~$4.5 million, compared to ~~net cash provided of $13.9~~$22.5 million in the ~~six~~first three months ended ~~April 28, 2013.~~February 2, 2014. In ~~2014,~~2015, net repayments of borrowings for the ~~accounts receivable securitization~~short-term financing program and other borrowing totaled ~~$19.6~~$4.4 million compared to $22.3 million in 2014 as a ~~net increase~~result of the decrease in the Staffing Services segment's accounts receivable due to lower revenues in the first quarter of fiscal 2015 compared to the fourth quarter of fiscal 2014 and proceeds from the decrease in cash restricted as collateral for borrowings of ~~$10.0 million in 2013.~~$9.1 million.

~~LIQUIDITY AND CAPITAL RESOURCES~~

~~Credit Markets and~~ Availability of Credit

At ~~May 4, 2014,~~February 1, 2015, we had short-term borrowing and credit facilities which provided for borrowing and issuance of letters of credit of up to an aggregate of $245.0 million, including our $200.0 million accounts receivable securitization program (“Short-Term Financing Program”) and our $45.0 million revolving credit agreement (“Short-Term Credit Facility”). Available borrowing under the Short-Term Financing Program is based on eligible receivable levels. Borrowings under the Short-Term Credit Facility require full cash collateralization.

As of ~~May 4, 2014,~~February 1, 2015, we had total outstanding short-term borrowings of ~~$147.5~~$115.0 million and were required to maintain ~~$28.8~~$1.3 million in cash collateral. At ~~May 4, 2014,~~February 1, 2015, the available borrowing under the short-term borrowing facilities included ~~$18.2~~$15.3 million under the Short-Term Financing Program and ~~$22.5~~$45.0 million available under the Short-Term Credit Facility.

~~Securitization~~Short-Term Financing Program

The Short-Term Financing Program provides for maximum borrowing of $200.0 million under a credit agreement secured by receivables from the Staffing Services business that are sold to a wholly-owned, consolidated, bankruptcy-remote subsidiary and are available first to satisfy the lender. The ~~program expires on December 31, 2016 and the~~ benchmark interest rate for which interest is charged on the sale of receivables is a LIBOR index. The program is subject to termination under certain circumstances including the default rate on receivables, as defined, exceeding a specified threshold or the rate of collections on receivables failing to meet a specified threshold. At ~~May 4, 2014,~~February 1, 2015, we were in compliance with the program covenants.

On December 12, 2014, we amended the agreement to extend the program for an additional year to December 31, 2017. In addition, the amendment increased the borrowing base of eligible receivables by including unbilled activity up to 15% of total eligible receivables, and receivables from customers with 61-95 payment terms up to a maximum of 5% of total eligible receivables.

At ~~May 4, 2014~~February 1, 2015 and November ~~3, 2013,~~2, 2014, we had outstanding borrowing under the program of ~~$125.0~~$115.0 million and ~~$142.0~~$120.0 million, respectively, which bore a weighted average annual interest rate of 1.7% and 1.6% during the first ~~six~~three months of 2015 and 2014, ~~and 2013,~~respectively, inclusive of certain facility and program fees.

Credit ~~Facilities~~Facility

The Short-Term Credit Facility provides for borrowing in various currencies secured by cash collateral covering 105% of certain baseline amounts. The facility is subject to a facility fee and borrowings bear various interest rate options calculated using a combination of LIBOR and prime rates plus a margin over those rates. ~~The facility expires on March 31, 2015.~~ At ~~May 4, 2014,~~February 1, 2015, we were in compliance with the facility covenants.

We had no outstanding borrowings under the $45.0 million Short-Term Credit Facility as of February 1, 2015. At ~~May 4,~~November 2, 2014, ~~and November 3, 2013,~~ we had drawn under the facility ~~$22.5~~$8.5 million, ~~and $22.3 million, respectively,~~ in various currencies used to hedge our net investment in certain foreign subsidiaries. During the first ~~six~~three months of ~~fiscal~~ 2014, ~~and 2013,~~ borrowings bore a weighted average annual interest rate of 1.9% ~~and 2.0%~~, ~~respectively,~~ inclusive of the facility fee.

19On February 20, 2015, we amended our $45.0 million Short-Term Credit Facility to extend the program for an additional year to March 31, 2016. The amendment adds the ability for collateral to be held in certain foreign currencies (Euro, British Pounds Sterling, and Canadian Dollars) making it more useful in natural hedging against non-United States Dollar denominated liability positions, and removes in its entirety the covenant limiting restricted payments such as stock repurchases to the greater of $5.0 million or 50% of prior year net consolidated income. Borrowings under the Short-Term Credit Facility continues to be cash collateralized.

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 November ~~3, 2013.~~2, 2014.

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, foreign currency exchange rate fluctuations and changes in the market value of financial instruments. We limit these risks through risk management policies and procedures, including the use of ~~derivatives.~~derivatives from time to time.

Interest Rate Risk

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. At ~~May 4, 2014,~~February 1, 2015, we had cash and cash equivalents on which interest income is earned at variable rates. At ~~May 4, 2014,~~February 1, 2015, we also had credit lines with various domestic and foreign banks that provide for borrowings and letters of credit as well as a $200.0 million ~~accounts receivable securitization~~Short Term Financing program to provide additional liquidity to meet our short-term financing needs.

The interest rates on these borrowings and financings are variable and, therefore, interest and other expense and interest income are affected by the general level of U.S. and foreign interest rates. Based upon the current levels of cash invested, notes payable to banks and utilization of the ~~securitization~~Short Term Financing program, on a short-term basis, a hypothetical 1-percentage-point increase in interest rates would have increased net interest expense by $0.9 million.

We have a term loan with borrowing of ~~$8.6~~$8.0 million at a fixed interest rate, and our interest expense related to this borrowing is not affected by changes in interest rates in the near term. The fair value of the fixed rate term loan was approximately ~~$9.4~~$8.9 million at ~~May 4, 2014.~~February 1, 2015. The fair values were calculated by applying the appropriate period end interest rates to our present streams of loan payments.

Foreign Currency Risk

We have operations in several foreign countries and conduct business in the local currency in these countries. As a result, we have risk associated with currency fluctuations as the value of the dollar fluctuates against foreign currencies, in particular the British pound, Euro, Canadian dollar and Uruguayan peso. These fluctuations impact reported earnings.

Fluctuations in currency exchange rates also impact the U.S. dollar amount of our net investment in foreign operations. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the fiscal period-end balance sheet date. Income and expense accounts are translated at an average exchange rate during the period which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded in stockholders’ equity as a component of accumulated other comprehensive income. The U.S. dollar ~~weakened~~strengthened relative to many foreign currencies as of ~~May 4, 2014~~February 1, 2015 compared to November ~~3, 2013.~~2, 2014. Consequently, stockholders’ equity ~~increased~~decreased by ~~$1.9~~$4.3 million as a result of the foreign currency translation as of ~~May 4, 2014.~~February 1, 2015.

To reduce exposure related to non-U.S. dollar denominated net investments that may give rise to a foreign currency transaction gain or loss, we may enter into derivative and non-derivative financial instruments to hedge our net investment in certain foreign subsidiaries. We also may enter into forward foreign exchange contracts with third party banks to mitigate foreign currency risk. As of ~~May 4, 2014,~~February 1, 2015, we had ~~$22.5 million of~~no foreign currency denominated borrowings ~~(primarily Euro, British pound and Canadian dollar)~~ that were used as economic hedges against ~~the Company’s~~our net investment in certain foreign operations. We do not designate and document these instruments as hedges under Accounting Standards Codification (“ASC”) 815 ~~“Derivatives~~Derivatives and Hedging”, and as a result, gains and losses associated with these instruments are included in ~~Foreign Exchange Gain (Loss)~~foreign exchange gain (loss), net in our Condensed Consolidated Statements of Operations.

Based upon the current levels of net foreign assets, a hypothetical 10% devaluation of the U.S. dollar as compared to these currencies as of ~~May 4, 2014~~February 1, 2015 would result in an approximate ~~$1.5~~$3.5 million positive translation adjustment recorded in other comprehensive income within stockholders’ equity. Conversely, a hypothetical 10% appreciation of the U.S. dollar as compared to these currencies as of ~~May 4, 2014~~February 1, 2015 would result in an approximate ~~$1.5~~$3.5 million negative translation adjustment recorded in other comprehensive income within stockholders’ equity. We do not use derivative instruments for trading or other speculative purposes.

Equity Risk

Our investments are exposed to market risk as they relate to changes in market value. We hold investments primarily in mutual funds for the benefit of participants in our non-qualified deferred compensation plan, and changes in the market value of these investments result in offsetting changes in our liability under the non-qualified deferred compensation plans as the employees realize the rewards and bear the risks of their investment selections. At ~~May 4, 2014,~~February 1, 2015, the total market value of these investments was ~~$5.7~~approximately $5.0 million.

ITEM 4. CONTROLS AND PROCEDURES

Volt maintains “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Volt’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Volt’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Volt has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of Volt’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Volt’s disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that Volt’s disclosure controls and procedures were effective.

There have been no significant changes in Volt’s internal controls over financial reporting that occurred during the fiscal quarter ended ~~May 4, 2014~~February 1, 2015 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company’s loss contingencies consist primarily of claims and legal actions related to contingent worker employment matters in the Staffing Services segment. 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.

In July 2013, Oracle Corporation brought suit against us alleging copyright infringement and related claims. The complaint alleges that our information technology infrastructure services business provided customer installation services of software updates for Oracle’s computer operating system software and system firmware without appropriate authorization or license. Oracle alleges that it provides customers with updates only if they have purchased support agreements covering servers on which updates will be installed. We have asserted defenses and counterclaims of anti-competitive practices and related claims. The matter is scheduled for trial to commence on August 3, 2015.

Since our ~~2013~~2014 Form 10-K, there have been no material developments in the material legal proceedings in which we are involved.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our ~~2013~~2014 10-K, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, “Item 1A. Risk Factors” in our ~~2013~~2014 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

The following exhibits are filed as part of, or incorporated by reference into, this report:



Exhibits		Description


2.1		Membership Interest Purchase Agreement dated December 1, 2014, by and between VoltDelta, the Company and NewNet (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed December 5, 2014; File No. 001-09232)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350

32.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

2221

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



	VOLT INFORMATION SCIENCES, INC.

Date: ~~June~~March 13, ~~2014~~2015	By:	/s/	Ronald Kochman
		Ronald Kochman
		President and Chief Executive Officer (Principal Executive Officer)

Date: ~~June~~March 13, ~~2014~~2015	By:	/s/	James Whitney Mayhew
		James Whitney Mayhew
		Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

2322



	Six Months Ended May 4, 2014
(in thousands)	Total			Staffing Services		Computer Systems			Other
Revenue
Staffing service revenue	$	799,002		$	799,002	$	—		$	—
Other revenue	89,631			—		30,925			58,706
Net revenue	888,633			799,002		30,925			58,706
Expenses
Direct cost of staffing services revenue	687,359			687,359		—			—
Cost of other revenue	75,934			—		27,735			48,199
Selling, administrative and other operating costs	126,725			107,441		10,188			9,096
Amortization of purchased intangible assets	559			50		429			80
Restructuring costs	1,959			1,234		623			102
Segment operating income (loss)	(3,903		)	2,918		(8,050		)	1,229
Corporate general and administrative	5,237
Restatement, investigations and remediation	5,261
Operating loss	$	(14,401	)