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Table of Contents
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
[MARK ONE]
 
 
[X]
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
 
For the quarterly period ended JUNE 30, 2002
 
OR
 
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934
 
For the transition period from                        to                       
 
Commission File No. 000-22195
 
 
AHL SERVICES, INC.
(Exact name of registrant as specified in its charter)
 
 
GEORGIA

 
58-2277249

(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
     
1000 WILSON BLVD, STE 910
ARLINGTON, VA

 
22209

(Address of principal executive offices)
 
(Zip Code)
     
Registrant’s telephone number, including area code (703) 528-9688
Not Applicable

Former name, former address and former fiscal year, if changed since last report.
 
 
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  ¨
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 15,246,792 shares on August 1, 2002.


Table of Contents
AHL SERVICES, INC.
 
TABLE OF CONTENTS
 
         
PAGE

    
PART I—FINANCIAL INFORMATION
    
Item  1.
  
Financial Statements
    
       
1
       
2
       
3
       
4
Item 2.
     
8
Item 3.
     
15
    
PART II—OTHER INFORMATION
    
Item 4.
     
16
Item 5.
     
16
Item 6.
     
16
 


Table of Contents
PART I—FINANCIAL INFORMATION
 
ITEM 1—FINANCIAL STATEMENTS
 
AHL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
 
    
June 30,
2002

    
December 31, 2001

 
    
(Unaudited)
        
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
  
$
1,100
 
  
$
6,817
 
Accounts receivable, net of allowance of $5,904 and $ 7,650 in 2002 and 2001, respectively
  
 
21,117
 
  
 
16,349
 
Unbilled services
  
 
5,086
 
  
 
7,873
 
Work in process
  
 
1,239
 
  
 
1,350
 
Reimbursable customer expenses
  
 
7,061
 
  
 
5,542
 
Prepaid expenses and other
  
 
4,551
 
  
 
3,144
 
Income taxes receivable
  
 
375
 
  
 
10,997
 
Deferred income taxes
  
 
1,473
 
  
 
1,675
 
Net current assets of discontinued operations
  
 
2,856
 
  
 
1,022
 
    


  


Total current assets
  
 
44,858
 
  
 
54,769
 
Property and equipment, net
  
 
21,705
 
  
 
22,553
 
Intangibles, net
  
 
82,441
 
  
 
103,295
 
Other assets
  
 
437
 
  
 
341
 
Notes receivable
  
 
—  
 
  
 
5,000
 
Net noncurrent assets of discontinued operations
  
 
30,544
 
  
 
58,725
 
    


  


Total assets
  
$
179,985
 
  
$
244,683
 
    


  


LIABILITIES AND SHAREHOLDERS’ EQUITY
                 
Current liabilities:
                 
Accounts payable
  
$
3,143
 
  
$
6,465
 
Accrued expenses
  
 
13,011
 
  
 
17,426
 
Customer deposits
  
 
2,388
 
  
 
4,961
 
Current portion of self-insurance reserves
  
 
1,856
 
  
 
1,296
 
Current portion of settlement obligation
  
 
9,000
 
  
 
—  
 
Current portion of debt
  
 
81,384
 
  
 
27,035
 
    


  


Total current liabilities
  
 
110,782
 
  
 
57,183
 
Debt, less current portion
  
 
—  
 
  
 
77,114
 
Self-insurance reserves, less current portion
  
 
1,469
 
  
 
1,475
 
Settlement obligations, less current portion
  
 
9,000
 
  
 
18,000
 
    


  


Total liabilities
  
 
121,251
 
  
 
153,772
 
    


  


Shareholders’ equity:
                 
Common stock, $.01 par value:
                 
17,427,392 shares issued; 15,246,792 shares outstanding
  
 
175
 
  
 
175
 
Preferred stock, no par value: no shares outstanding
  
 
—  
 
  
 
—  
 
Paid-in capital
  
 
177,011
 
  
 
177,011
 
Accumulated deficit
  
 
(98,452
)
  
 
(66,275
)
Treasury stock at cost: 2,180,600 shares
  
 
(20,000
)
  
 
(20,000
)
    


  


Total shareholders’ equity
  
 
58,734
 
  
 
90,911
 
    


  


Total liabilities and shareholders’ equity
  
$
179,985
 
  
$
244,683
 
    


  


 
The accompanying notes are an integral part of these condensed consolidated financial statements.

1


Table of Contents
AHL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share data)
 
    
Three Months Ended June 30,

    
Six Months Ended
June 30,

 
    
2002

    
2001

    
2002

    
2001

 
Revenues
  
$
33,714
 
  
$
35,381
 
  
$
65,930
 
  
$
73,254
 
Cost of services
  
 
15,096
 
  
 
15,647
 
  
 
29,303
 
  
 
33,198
 
    


  


  


  


Gross margin
  
 
18,618
 
  
 
19,734
 
  
 
36,627
 
  
 
40,056
 
Costs and expenses:
                                   
Operating
  
 
15,665
 
  
 
15,365
 
  
 
31,381
 
  
 
32,600
 
Corporate general and administrative
  
 
856
 
  
 
911
 
  
 
1,735
 
  
 
2,522
 
Depreciation and amortization
  
 
1,430
 
  
 
2,255
 
  
 
2,625
 
  
 
4,375
 
Final PIMMS severance costs
  
 
—  
 
  
 
—  
 
  
 
—  
 
  
 
2,523
 
    


  


  


  


Operating income (loss)
  
 
667
 
  
 
1,203
 
  
 
886
 
  
 
(1,964
)
Interest expense, net
  
 
1,732
 
  
 
1,024
 
  
 
3,354
 
  
 
1,776
 
Other expense
  
 
1,775
 
  
 
—  
 
  
 
1,775
 
  
 
—  
 
    


  


  


  


Income (loss) from continuing operations before income taxes
  
 
(2,840
)
  
 
179
 
  
 
(4,243
)
  
 
(3,740
)
Income tax provision (benefit)
  
 
—  
 
  
 
72
 
  
 
—  
 
  
 
(1,496
)
    


  


  


  


Income (loss) from continuing operations
  
 
(2,840
)
  
 
107
 
  
 
(4,243
)
  
 
(2,244
)
Discontinued operations:
                                   
Loss from discontinued operations, net of taxes
  
 
(1,186
)
  
 
(1,042
)
  
 
(3,102
)
  
 
(25
)
Loss on sale of business, net of taxes
  
 
(4,109
)
  
 
—  
 
  
 
(4,109
)
  
 
—  
 
    


  


  


  


Loss from discontinued operations
  
 
(5,295
)
  
 
(1,042
)
  
 
(7,211
)
  
 
(25
)
    


  


  


  


Net loss before cumulative effect of change in accounting principle
  
 
(8,135
)
  
 
(935
)
  
 
(11,454
)
  
 
(2,269
)
Cumulative effect of change in accounting principle
  
 
—  
 
  
 
—  
 
  
 
(20,723
)
  
 
—  
 
    


  


  


  


Net loss
  
$
(8,135
)
  
$
(935
)
  
$
(32,177
)
  
$
(2,269
)
    


  


  


  


Basic and diluted earnings (loss) per share:
                                   
Income (loss) from continuing operations
  
$
(0.18
)
  
$
0.01
 
  
$
(0.28
)
  
$
(0.15
)
Loss from discontinued operations
  
$
(0.35
)
  
$
(0.07
)
  
$
(0.47
)
  
$
—  
 
Cumulative effect of change in accounting principle
  
$
—  
 
  
$
—  
 
  
$
(1.36
)
  
$
—  
 
    


  


  


  


Net loss
  
$
(0.53
)
  
$
(0.06
)
  
$
(2.11
)
  
$
(0.15
)
    


  


  


  


Weighted average common and common equivalent shares:
                                   
Basic
  
 
15,247
 
  
 
15,255
 
  
 
15,247
 
  
 
15,320