SECURITIES AND EXCHANGE COMMISSION
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 JUNE 29, 2003 |
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| or |
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| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
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Commission File Number 1-10893
Ablest Inc.
| Delaware | 65-0978462 | |
| (State of Incorporation) | (I.R.S. Identification No.) |
1901 Ulmerton Road, Suite 300
Clearwater, Florida 33762
(727) 299-1200
(Address, including zip code, and telephone number, including area code, of principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
The number of outstanding shares of the registrant’s Common Stock at June 29, 2003 was 2,868,722.
ABLEST INC.
Table of Contents
| Item No. | Page | |||||||||||
PART I FINANCIAL INFORMATION |
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| 1. | Financial Statements: |
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| Condensed Balance Sheets as of June 29, 2003 (Unaudited) and December 29, 2002 |
3 | |||||||||||
| Condensed Statements of Operations (Unaudited) for the Thirteen and Twenty-six week periods ended June 29, 2003 and June 30, 2002 |
4 | |||||||||||
| Condensed Statements of Cash Flows (Unaudited) for the Twenty-six week periods ended June 29, 2003 and June 30, 2002 |
5 | |||||||||||
| Notes to Condensed Financial Statements |
6 | |||||||||||
| 2. | Management's Discussion and Analysis of Results of Operations and Financial Condition |
9 | ||||||||||
| 3. | Quantitative and Qualitative Disclosure about Market Risk |
11 | ||||||||||
| 4. | Controls and Procedures |
11 | ||||||||||
PART II OTHER INFORMATION |
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| 1. | Legal Proceedings |
12 | ||||||||||
| 2. | Change in Securities and Uses of Proceeds |
12 | ||||||||||
| 3. | Defaults Upon Senior Securities |
12 | ||||||||||
| 4. | Submission of Matters to Vote of Security Holders |
12 | ||||||||||
| 5. | Other Information |
12 | ||||||||||
| 6. | Exhibits and Reports on Form 8-K |
12 | ||||||||||
SIGNATURE |
13 | |||||||||||
2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABLEST INC.
Condensed Balance Sheets
(amounts in thousands except share and per share data)
| June 29, 2003 | December 29, 2002 | |||||||||||
| (Unaudited) | ||||||||||||
ASSETS |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | 3,646 | $ | 1,858 | ||||||||
Accounts receivable, net |
11,280 | 11,639 | ||||||||||
Prepaid expenses and other current assets |
428 | 296 | ||||||||||
Current deferred tax asset |
988 | 988 | ||||||||||
Total current assets |
16,342 | 14,781 | ||||||||||
Property, plant and equipment, net |
728 | 872 | ||||||||||
Deferred tax asset, net |
2,234 | 2,234 | ||||||||||
Goodwill, net |
1,283 | 1,283 | ||||||||||
Other assets |
39 | 46 | ||||||||||
Total assets |
$ | 20,626 | $ | 19,216 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES |
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Accounts payable |
$ | 196 | $ | 256 | ||||||||
Accrued expenses and other current liabilities |
3,692 | 4,008 | ||||||||||
Short-term borrowings |
2,000 | — | ||||||||||
Total current liabilities |
5,888 | 4,264 | ||||||||||
Other liabilities |
67 | 81 | ||||||||||
Total liabilities |
5,955 | 4,345 | ||||||||||
COMMITMENTS AND CONTINGENCIES |
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STOCKHOLDERS’ EQUITY |
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Preferred stock of $.05 par value; 500,000 shares authorized,
none issued or outstanding at
June 29, 2003 and December 29, 2002 |
— | — | ||||||||||
Common stock of $.05 par value; 7,500,000 shares authorized,
3,308,929 shares issued and outstanding including shares held in
treasury at June 29, 2003 and December 29, 2002, respectively |
165 | 165 | ||||||||||
Additional paid-in capital |
4,936 | 4,936 | ||||||||||
Retained earnings |
11,584 | 11,725 | ||||||||||
Treasury stock at cost; 440,207 and 428,341 shares held at
June 29, 2003 and December 29, 2002, respectively |
(2,014 | ) | (1,955 | ) | ||||||||
Total stockholders’ equity |
14,671 | 14,871 | ||||||||||
Total liabilities and stockholders’ equity |
$ | 20,626 | $ | 19,216 | ||||||||
See accompanying Notes to Condensed Financial Statements
3
ABLEST INC.
Condensed Statements of Operations
(amounts in thousands except share and per share data)
(Unaudited)
| For the Thirteen Week | For the Twenty-six Week | |||||||||||||||||
| Periods Ended | Periods Ended | |||||||||||||||||
| June 29, 2003 | June 30, 2002 | June 29, 2003 | June 30, 2002 | |||||||||||||||
Net service revenues |
$ | 24,264 | $ | 26,234 | $ | 47,503 | $ | 45,461 | ||||||||||
Cost of services |
20,550 | 21,411 | 39,666 | 37,027 | ||||||||||||||
Gross profit |
3,714 | 4,823 | 7,837 | 8,434 | ||||||||||||||
Selling, general and administrative expenses |
3,830 | 4,404 | 8,075 | 8,597 | ||||||||||||||
Operating income (loss) |
(116 | ) | 419 | (238 | ) | (163 | ) | |||||||||||
Other: |
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Interest income (expense), net |
(17 | ) | (6 | ) | (22 | ) | 44 | |||||||||||
Miscellaneous, net |
17 | (8 | ) | 33 | (4 | ) | ||||||||||||
Other income (loss) |
— | (14 | ) | 11 | 40 | |||||||||||||
Income (loss) before income taxes |
(116 | ) | 405 | (227 | ) | (123 | ) | |||||||||||
Income tax expense (benefit) |
(44 | ) | — | (86 | ) | (201 | ) | |||||||||||
Net income (loss) |
$ | (72 | ) | $ | 405 | $ | (141 | ) | $ | 78 | ||||||||
Basic net income (loss) per common share |
$ | (0.03 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.03 | ||||||||
Diluted net income (loss) per common share |
$ | (0.03 | ) | $ | 0.14 | $ | (0.05 | ) | $ | 0.03 | ||||||||
Weighted average number of common shares in
computing net income (loss) per common share |
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Basic |
2,868,381 | 2,873,007 | 2,864,845 | 2,896,944 | ||||||||||||||
Diluted |
2,868,381 | 2,893,007 | 2,864,845 | 2,916,944 | ||||||||||||||
See accompanying Notes to Condensed Financial Statements
4
ABLEST INC.
Condensed Statements of Cash Flows
(amounts in thousands)
(Unaudited)
| For the Twenty-six Week | |||||||||||
| Periods Ended | |||||||||||
| June 29, 2003 | June 30, 2002 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) from continuing operations |
$ | (141 | ) | $ | 78 | ||||||
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities: |
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Depreciation |
258 | 343 | |||||||||
Loss (gain) on disposal of property, plant and equipment |
3 | 6 | |||||||||
Deferred income taxes |
— | (1 | ) | ||||||||
Stock compensation |
13 | 51 | |||||||||
Changes in assets and liabilities (see below) |
(169 | ) | (2,081 | ) | |||||||
Net cash provided by (used in) operating activities |
(36 | ) | (1,604 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
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Additions to property, plant and equipment |
(117 | ) | (27 | ) | |||||||
Net cash provided by (used in) investing activities |
(117 | ) | (27 | ) | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from short-term borrowings |
2,000 | 1,650 | |||||||||
Repayment of short-term borrowings |
— | (200 | ) | ||||||||
Purchase of treasury shares |
(59 | ) | (71 | ) | |||||||
Net cash provided by (used in) financing activities |
1,941 | 1,379 | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
1,788 | (252 | ) | ||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
1,858 | 607 | |||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ | 3,646 | $ | 355 | |||||||
Changes in assets and liabilities providing (using) cash: |
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Accounts receivable, net |
$ | 359 | $ | (3,495 | ) | ||||||
Prepaid expenses and other current assets |
(132 | ) | (163 | ) | |||||||
Other assets |
7 | — | |||||||||
Accounts payable |
(60 | ) | 73 | ||||||||
Accrued expenses and other current liabilities |
(329 | ) | 1,504 | ||||||||
Other liabilities |
(14 | ) | — | ||||||||
Total change in assets and liabilities providing (using) cash |
$ | (169 | ) | $ | (2,081 | ) | |||||
See accompanying Notes to Condensed Financial Statements
5
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
1. COMPANY BACKGROUND
Ablest Inc. (“Company”) offers staffing services in the United States. Staffing services are principally provided through 44 service locations in the Eastern United States and selected Southwestern markets with the capability to supply staffing services for the clerical, industrial and information technology needs of their customers. Positions often filled include, but are not limited to, data entry, office administration, telemarketing, light industrial assembly, order picking, shipping, network administration, database administration, program analyst, web development, project management and technical writing. Ablest does not service any specific industry or field; instead, its services are provided to a broad-based customer list.
2. BASIS OF PRESENTATION
These interim financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 29, 2002. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
All adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been reflected in these condensed financial statements. The operating results for the twenty-six week period ended June 29, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2003.
In order to maintain consistency and comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform with the financial statement presentation of the current period.
3. NEW ACCOUNTING PRONOUNCEMENTS
In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standards No. 148, (“SFAS No. 148”), “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years ending after December 15, 2002 and did not have a material financial impact upon the Company.
6
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
4. SHORT-TERM BORROWINGS
On July 22, 2001, the Company signed a $5,000,000 Standard LIBOR Grid Note agreement (“LIBOR Agreement”) with Manufacturers and Traders Trust Company (“M&T”). The interest rate on borrowings under the unsecured credit facility is elected by the Company at the time of borrowing and is either (i) the bank’s prime rate or (ii) the 30, 60, or 90 day London Interbank Offered Rate (“LIBOR”) plus 250 basis points (“Modified LIBOR Rate”).
The LIBOR Agreement is a one-year demand note that originally expired on July 21, 2001 and is renewable annually with the consent of both parties. It does not contain working capital or other restrictive covenants. On June 14, 2002, the Company renewed the LIBOR Agreement for another year extending the expiration date to July 22, 2003. All other terms and conditions of the LIBOR Agreement remain unchanged.
The $2,000,000 in short-term borrowings on the balance sheet for June 29, 2003, was borrowed under this LIBOR Agreement. See Note 7, Subsequent Events, for additional information.
5. STOCKHOLDERS’ EQUITY
The changes in stockholders’ equity for the twenty-six week period ended June 29, 2003 are summarized as follows:
| Additional | Total | |||||||||||||||||||||||
| (amounts in thousands, | Common | Paid-in | Retained | Treasury | Stock | Stockholders' | ||||||||||||||||||
| except share data) | Stock | Capital | Earnings | Shares | Amount | Equity | ||||||||||||||||||
Balance at December 29, 2002 |
$ | 165 | $ | 4,936 | $ | 11,725 | 428,341 | $ | (1,955 | ) | $ | 14,871 | ||||||||||||
Net loss |
— | — | (141 | ) | — | — | (141 | ) | ||||||||||||||||
Stock repurchase program |
— | — | — | 11,866 | (59 | ) | (59 | ) | ||||||||||||||||
Balance at June 29, 2003 |
$ | 165 | $ | 4,936 | $ | 11,584 | 440,207 | $ | (2,014 | ) | $ | 14,671 | ||||||||||||
6. STOCK OPTIONS
The Company grants stock options for a fixed number of shares to executive officers, certain other key employees, and independent directors. On May 20, 2003, the date of the Company’s Annual Meeting of Shareholders, upon re-election to the Board of Directors (“Board”), the independent directors of the Board were granted options to purchase 6,000 shares as per the terms of the Company’s Independent Directors’ Stock Option Plan. The options become fully vested one year from the date of grant. The options are exercisable at the closing market price on the date of grant.
The Company has elected to continue to use the intrinsic value method of accounting for stock options under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. The following table represents the effect on net income and earnings per share if the Company had applied the fair value based method and recognition provisions of Financial Accounting Standards No. 123, (“SFAS No. 123”), “Accounting for Stock-Based Compensation”.
7
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
| For the Twenty-six Week | ||||||||
| Periods Ended | ||||||||
| (amounts in thousands except share and per share data) | June 29, 2003 | June 30, 2002 | ||||||
Net income (loss), as reported |
$ | (141 | ) | $ | 78 | |||
Deduct: Total stock-based employee compensation expense
determined under fair value methods for all awards, net of
related tax effects |
15 | — | ||||||
Net income (loss), pro forma |
$ | (156 | ) | $ | 78 | |||
Net income (loss) per share: |
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Basic, as reported |
$ | (0.05 | ) | $ | 0.03 | |||
Diluted, as reported |
$ | (0.05 | ) | $ | 0.03 | |||
Basic, pro forma |
$ | (0.05 | ) | $ | 0.03 | |||
Diluted, pro forma |
$ | (0.05 | ) | $ | 0.03 | |||
Weighted average number of common shares in
computing net income (loss) per common share |
||||||||
Basic |
2,864,845 | 2,896,944 | ||||||
Diluted |
2,864,845 | 2,916,944 | ||||||
7. SUBSEQUENT EVENTS
In July 2003, the Company renewed the LIBOR Agreement for thirty days.
On August 13, 2003, the Company signed a two year $7,500,000 Committed Revolving Credit Facility (“Facility”) to replace the existing LIBOR Agreement. The Company elects the interest rate on borrowings under the Facility at the time of borrowing at either the bank’s prime rate or the 30, 60, or 90 day LIBOR plus 200 basis points. The Facility expires on August 12, 2005 and is renewable for one year with the consent of both parties. The Facility requires the Company to maintain certain financial covenants including a tangible net worth ratio among other restrictions.
8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Statements made in this discussion, other than those concerning historical information, should be considered forward-looking and subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. This notice is intended to take advantage of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. Risks and uncertainties include, but are not limited to, hiring and maintaining qualified employees, legislative and judicial reforms which could increase the cost of our services to our customers and make the use of staffing service providers less beneficial, the proper functioning of our management information systems and the continuing economic recession.
Results of Operations:
The following discussion compares the quarter ended June 29, 2003 to the quarter ended June 30, 2002, and June 29, 2003 year to date to June 30, 2002 year to date and should be read in conjunction with the Condensed Financial Statements, including the related notes thereto, appearing elsewhere in this Report.
Revenues totaled $24.3 million and $47.5 million for the quarter and year to date periods ended June 29, 2003 as compared to $26.2 mi