Volt Information Sciences (VOLT) 10-Q2022 Q1 Quarterly report

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

NOTE 1: Basis of Presentation

NOTE 2: Recently Issued Accounting Pronouncements

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

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

NOTE 3: Leases

NOTE 4: Revenue Recognition

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

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

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

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

The following table presents our segment revenues disaggregated by service type (in thousands):

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

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

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

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

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

NOTE 5: Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss for the three months ended January 30, 2022 were (in thousands):

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

NOTE 6: Restricted Cash and Short-Term Investments

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

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

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

NOTE 7: Fair Value of Financial Instruments

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

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

NOTE 8: Income Taxes

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

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

NOTE 9: Debt

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

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

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

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

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

respect to Eurocurrency funding. If an event of default occurs, all loans shall bear interest at a rate per annum equal to the prime rate (the federal funds rate plus 3%) plus 2.5%.

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

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

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

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

Long-term debt consists of the following (in thousands):

NOTE 10: Earnings (Loss) Per Share

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

NOTE 11: Share-Based Compensation Plans

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

The PSUs are eligible to vest in 3 equal tranches at the end of each performance period. Vesting of the PSUs is dependent on the achievement of the adjusted Earnings Before Interest, Taxes, Depreciation and Amortization margin percentage goals based on adjusted revenues at the end of each fiscal year of the one-year, two-year and three-year performance periods and provided that the employees remain employed with the Company on the applicable vesting date. The payout percentages can range from 0% to 150%. The employee RSUs are time-vested and vest in equal annual tranches over three years, provided that the employees remain employed with the Company on the applicable vesting date. The Board of Director RSUs vest one year from the grant date provided that the director provides continued service through the vesting date. The grant date fair value for the PSUs and RSUs is measured using the closing stock price on the grant date. The PSUs and RSUs had a total grant date fair value of approximately $1.6 million and $2.4 million, respectively.

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

NOTE 12: Restructuring and Severance Charges

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

The remaining balance as of January 30, 2022 of $0.2 million, was primarily related to severance costs in the International Staffing and North American MSP segments.

NOTE 13: Commitments and Contingencies

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

NOTE 14: Segment Data

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

Financial data concerning the Company’s segment revenue and operating income (loss) as well as results from Corporate and Other are summarized in the following tables (in thousands):

NOTE 15: Subsequent Events

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

offices. We have also been able to reduce certain business travel by using virtual and collaborative tools whenever possible, further limiting our ecological impact. Volt is committed to enhancing its environmental protection measures and continuing to promote an eco-friendly culture both internally and in the communities it serves.

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

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

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

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

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

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

Net revenue in the first quarter of fiscal 2022 increased $8.9 million, or 4.1%, to $226.9 million from $218.0 million in the first quarter of fiscal 2021. The net revenue increase was primarily due to an increase in our North American Staffing segment of $7.0 million and an increase in our International Staffing segment of $2.0 million. Excluding the negative impact of foreign currency fluctuations of $0.8 million, net revenue increased $9.8 million, or 4.5%.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The following table sets forth our cash and global liquidity levels at the end of our last five fiscal quarters (in thousands):

Liquidity Outlook

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

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

Off-Balance Sheet Arrangements

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

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

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

There have been no significant changes in Volt’s internal controls over financial reporting that occurred during the fiscal quarter ended January 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 1. LEGAL PROCEEDINGS

Since our 2021 Form 10-K, there have been no material developments in the material legal proceedings in which we are involved.

ITEM 1A. RISK FACTORS

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. MINE SAFETY DISCLOSURE

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS