SECURITIES AND EXCHANGE COMMISSION
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 001-13956
VENTURI PARTNERS, INC.
| Delaware | 7363 | 56-1930691 | ||
| (State or other jurisdiction of | (Primary Standard Industrial | (I.R.S. employer | ||
| incorporation or organization) | Classification Code number) | identification number) |
Five LakePointe Plaza
2709 Water Ridge Parkway, 2nd Floor
Charlotte, North Carolina 28217
(Address, including zip code, of
Registrant’s principal executive offices)
(704) 442-5100
Personnel Group of America, Inc.
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 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
VENTURI PARTNERS, INC.
TABLE OF CONTENTS
| Page | ||||||
| PART I - FINANCIAL INFORMATION | ||||||
| Item 1. | Financial Statements (unaudited) | |||||
| Unaudited Consolidated Statements of Operations | 3 | |||||
| Unaudited Consolidated Balance Sheets | 4 | |||||
| Unaudited Consolidated Statements of Shareholders’ Equity (Deficit) | 5 | |||||
| Unaudited Consolidated Statements of Cash Flows | 6 | |||||
| Notes to Unaudited Consolidated Financial Statements | 7 | |||||
| Item 2. | Management’s Discussion and Analysis of
Financial Condition and Results of Operations |
17 | ||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 | ||||
| Item 4. | Controls and Procedures | 26 | ||||
| PART II - OTHER INFORMATION | ||||||
| Item 2. | Changes in Securities and Use of Proceeds | 27 | ||||
| Item 4. | Submission of Matters to Vote of Security Holders | 27 | ||||
| Item 6. | Exhibits and Reports on Form 8-K | 29 | ||||
| Signatures | 30 | |||||
| Exhibit Index | 31 | |||||
2
Venturi Partners, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
For the Periods Ended September 28, 2003 and September 29, 2002
(in thousands, except per share data)
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| Sept. 28, | Sept. 29, | Sept. 28, | Sept. 29, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
Revenues |
$ | 124,222 | $ | 137,681 | $ | 367,447 | $ | 421,466 | |||||||||
Direct costs of services |
96,957 | 105,965 | 288,469 | 322,640 | |||||||||||||
Gross profit |
27,265 | 31,716 | 78,978 | 98,826 | |||||||||||||
Operating expenses: |
|||||||||||||||||
Selling, general and administrative |
23,253 | 27,488 | 72,749 | 86,925 | |||||||||||||
Depreciation and amortization |
1,227 | 1,645 | 3,980 | 5,204 | |||||||||||||
Restructuring and rationalization charges |
236 | 452 | 2,351 | 1,377 | |||||||||||||
Stock option compensation |
267 | — | 267 | — | |||||||||||||
Operating income (loss) |
2,282 | 2,131 | (369 | ) | 5,320 | ||||||||||||
Interest expense |
196 | 4,275 | 5,332 | 12,972 | |||||||||||||
Gain (loss) on financial restructuring, net |
(28 | ) | (549 | ) | 83,105 | (1,235 | ) | ||||||||||
Income (loss) before income taxes and cumulative
effect of change in accounting principle |
2,058 | (2,693 | ) | 77,404 | (8,887 | ) | |||||||||||
Provision (benefit) for income taxes |
— | (534 | ) | — | 3,127 | ||||||||||||
Income (loss) before cumulative effect of change in
accounting principle |
2,058 | (2,159 | ) | 77,404 | (12,014 | ) | |||||||||||
Cumulative effect of change in accounting principle,
net of taxes |
— | — | — | (242,497 | ) | ||||||||||||
Net income (loss) |
$ | 2,058 | $ | (2,159 | ) | $ | 77,404 | $ | (254,511 | ) | |||||||
Basic earnings per common share: |
|||||||||||||||||
Income (loss) before cumulative effect of change in
accounting principle |
$ | 0.34 | $ | (2.02 | ) | $ | 18.60 | $ | (11.24 | ) | |||||||
Cumulative effect of change in accounting principle |
— | — | — | (226.82 | ) | ||||||||||||
Net income (loss) |
$ | 0.34 | $ | (2.02 | ) | $ | 18.60 | $ | (238.06 | ) | |||||||
Diluted earnings per common share: |
|||||||||||||||||
Income (loss) before cumulative effect of change in
accounting principle |
$ | 0.33 | $ | (2.02 | ) | $ | 18.60 | $ | (11.24 | ) | |||||||
Cumulative effect of change in accounting principle |
— | — | — | (226.82 | ) | ||||||||||||
Net income (loss) |
$ | 0.33 | $ | (2.02 | ) | $ | 18.60 | $ | (238.06 | ) | |||||||
The accompanying notes are an integral part of these statements.
3
Venturi Partners, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
September 28, 2003 and December 29, 2002
(in thousands, except per share data)
| September 28, | December 29, | ||||||||||
| 2003 | 2002 | ||||||||||
Assets |
|||||||||||
Current Assets: |
|||||||||||
Cash and cash equivalents |
$ | 3,735 | $ | 22,623 | |||||||
Accounts receivable, net of allowance for doubtful accounts of
$3,420 and $2,956 in 2003 and 2002, respectively |
72,393 | 76,178 | |||||||||
Prepaid expenses and other current assets |
3,630 | 3,940 | |||||||||
Recoverable income taxes |
125 | 25,476 | |||||||||
Total current assets |
79,883 | 128,217 | |||||||||
Property and equipment, net |
10,074 | 13,240 | |||||||||
Goodwill |
103,532 | 103,532 | |||||||||
Other assets |
1,278 | 2,417 | |||||||||
Total assets |
$ | 194,767 | $ | 247,406 | |||||||
Liabilities and Shareholders’ Equity (Deficit) |
|||||||||||
Current liabilities: |
|||||||||||
Current portion of long-term debt |
$ | — | $ | 38,633 | |||||||
Accounts payable |
10,359 | 9,887 | |||||||||
Accrued wages, benefits and other |
63,621 | 62,203 | |||||||||
Total current liabilities |
73,980 | 110,723 | |||||||||
Long-term debt -
|
|||||||||||
Convertible subordinated notes |
5,339 | 115,000 | |||||||||
Revolving credit facility (including $6,252 of deferred gain on
debt forgiveness in 2003) |
57,252 | 65,015 | |||||||||
Other long-term liabilities |
9,297 | 9,016 | |||||||||
Total liabilities |
145,868 | 299,754 | |||||||||
Commitments and contingencies |
|||||||||||
Shareholders’ equity (deficit): |
|||||||||||
Preferred stock, $.01 par value; shares authorized 5,000;
no shares issued and outstanding |
— | — | |||||||||
Common stock, $.01 par value; shares authorized 95,000; 6,090 and
1,323 shares issued and outstanding in 2003 and 2002, respectively |
61 | 13 | |||||||||
Additional paid-in capital |
295,978 | 315,722 | |||||||||
Retained earnings (accumulated deficit) |
(247,140 | ) | (324,544 | ) | |||||||
Less common stock held in treasury at cost - no shares and 247 shares
at September 28, 2003 and December 29, 2002, respectively |
— | (43,539 | ) | ||||||||
Total shareholders’ equity (deficit) |
48,899 | (52,348 | ) | ||||||||
Total liabilities and shareholders’ equity (deficit) |
$ | 194,767 | $ | 247,406 | |||||||
The accompanying notes are an integral part of these balance sheets.
4
Venturi Partners, Inc. and Subsidiaries
Consolidated Statements of Shareholders’ Equity (Deficit)
For the Period Ended September 28, 2003
(in thousands)
| Retained | Common | ||||||||||||||||||||||||||||||||
| Additional | Earnings | Stock | |||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-In | (Accumulated | Held in | |||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Treasury | Total | ||||||||||||||||||||||||||
Balance, December 29, 2002 |
— | $ | — | 33,065 | $ | 331 | $ | 315,404 | ($ | 324,544 | ) | ($ | 43,539 | ) | ($ | 52,348 | ) | ||||||||||||||||
Non-cash exchange of stock
to 5.75% noteholders |
1,044 | 10 | 20,940 | 209 | 21,823 | — | — | 22,042 | |||||||||||||||||||||||||
Issuance of common stock
purchase warrants |
— | — | — | — | 1,538 | — | — | 1,538 | |||||||||||||||||||||||||
Cancellation of treasury shares |
— | — | (6,184 | ) | (62 | ) | (43,477 | ) | 43,539 | — | |||||||||||||||||||||||
1-for-25 reverse stock split |
— | — | (45,909 | ) | (459 | ) | 459 | — | — | — | |||||||||||||||||||||||
Cash payment for fractional shares
in reverse stock split |
— | — | — | — | (4 | ) | — | — | (4 | ) | |||||||||||||||||||||||
Stock option compensation |
— | — | — | — | 267 | — | — | 267 | |||||||||||||||||||||||||
Conversion of preferred shares to
common shares |
(1,044 | ) | (10 | ) | 4,178 | 42 | (32 | ) | — | — | — | ||||||||||||||||||||||
Net income |
— | — | — | — | — | 77,404 | — | 77,404 | |||||||||||||||||||||||||
Balance, September 28, 2003 |
— | $ | — | 6,090 | $ | 61 | $ | 295,978 | ($ | 247,140 | ) | $ | — | $ | 48,899 | ||||||||||||||||||
The accompanying notes are an integral part of these statements.
5
Venturi Partners, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
For the Nine Months Ended September 28, 2003 and September 29, 2002
(in thousands)
| Sept. 28, | Sept. 29, | |||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income (loss) |
$ | 77,404 | $ | (254,511 | ) | |||||||
Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |
||||||||||||
Depreciation and amortization |
3,980 | 5,204 | ||||||||||
Amortization of deferred gain on financial restructuring, net |
(1,811 | ) | — | |||||||||
Stock option compensation |
267 | — | ||||||||||
(Gain) loss on financial restructuring, net |
(83,105 | ) | 1,235 | |||||||||
Cumulative effect of change in accounting principle, net of deferred tax
benefit of $42,198 |
— | 242,497 | ||||||||||
Deferred income taxes on income before cumulative effect of change in
accounting principle, net |
— | 3,287 | ||||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
3,785 | 4,535 | ||||||||||
Recoverable income taxes |
25,351 | 19,217 | ||||||||||
Accounts payable and accrued liabilities |
273 | (361 | ) | |||||||||
Other, net |
956 | 2,239 | ||||||||||
Net cash provided by operating activities |
27,100 | 23,342 | ||||||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property and equipment, net |
(642 | ) | (1,244 | ) | ||||||||
Proceeds from sale of business |
— | 3,825 | ||||||||||
Net cash provided by (used in) investing activities |
(642 | ) | 2,581 | |||||||||
Cash flows from financing activities: |
||||||||||||
Repayments under credit facility |
(47,700 | ) | (22,000 | ) | ||||||||
Borrowings under credit facility |
6,000 | 6,000 | ||||||||||
Credit facility amendment fees paid |
(1,680 | ) | (1,657 | ) | ||||||||
Repayments of other debt, net |
(648 | ) | (772 | ) | ||||||||
Restructuring payment to bondholders |
(1,314 | ) | — | |||||||||
Payment for fractional shares in reverse stock split |
(4 | ) | — | |||||||||
Proceeds from employee stock purchase plan |
— | 72 | ||||||||||
Net cash used in financing activities |
(45,346 | ) | (18,357 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents |
(18,888 | ) | 7,566 | |||||||||
Cash and cash equivalents at beginning of period |
22,623 | 17,557 | ||||||||||
Cash and cash equivalents at end of period |
$ | 3,735 | $ | 25,123 | ||||||||
Supplemental cash flow information: |
||||||||||||
Cash payments during the period for —
|
||||||||||||
Interest |
$ | 9,507 | $ | 13,332 | ||||||||
Income taxes |
2 | 23 | ||||||||||
The accompanying notes are an integral part of these statements.
6
VENTURI PARTNERS, INC.
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share data)
(1) General
The unaudited consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles; however, they do include all adjustments of a normal recurring nature that, in the opinion of management, are necessary to present fairly the results of operations of the Company for the interim periods presented. These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2002. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the entire year.
Certain amounts in prior periods have been reclassified to conform to the 2003 presentation, including reclassifying professional fees paid in connection with the Company’s recently completed financial restructuring (See Note 3, “Comprehensive Financial Restructuring”) from restructuring and rationalization charges to gain (loss) on financial restructuring, net.
(2) Name Change and Reverse Stock Split; Conversion of Preferred Shares
On August 5, 2003, the Company amended and restated its charter as contemplated in its recently completed financial restructuring. See Note 3, “Comprehensive Financial Restructuring.” Among other provisions, the charter amendment changed the Company’s corporate name to Venturi Partners, Inc., and effected a 1-for-25 reverse split of the Company’s Common Stock. The par value of the Common Stock remained at $0.01 per share. Shareholders’ equity has been restated by reclassifying the reduction in par value arising from the reverse stock split from Common Stock to additional paid-in capital. All references in the accompanying consolidated financial statements to the number of common shares, except for authorized share and per share amounts have been restated to reflect the reverse stock split.
On September 26, 2003, all outstanding shares of the Company’s Series B Convertible Participating Preferred Stock (the “Series B Preferred Stock”) were converted into shares of Common Stock in accordance with their terms.
(3) Comprehensive Financial Restructuring
On April 14, 2003, the Company completed a comprehensive financial restructuring with its senior lenders and the holders of $109,661 outstanding principal amount of its 5.75% Converti