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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 September 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
   
(I.R.S. Employer
incorporation or organization)
   
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 November 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.
      
16
Item 4.
      
17
    
PART II—OTHER INFORMATION
     
Item 6.
      
18
  
19
  
20
 

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)
 
    
September 30,
2002
     
December 31,
2001
  
ASSETS
   
(Unaudited)
         
Current assets:
                  
Cash and cash equivalents
   
$
3,526
 
   
$
6,817
 
Accounts receivable, net of allowance of $5,791 and $7,650 in 2002 and 2001, respectively
   
 
19,312
 
   
 
16,349
 
Unbilled services
   
 
5,849
 
   
 
7,873
 
Work in process
   
 
1,097
 
   
 
1,350
 
Reimbursable customer expenses
   
 
5,786
 
   
 
5,542
 
Prepaid expenses and other
   
 
5,056
 
   
 
3,144
 
Income taxes receivable
   
 
462
 
   
 
10,997
 
Deferred income taxes
   
 
1,473
 
   
 
1,675
 
Net current assets of discontinued operations
   
 
288
 
   
 
1,022
 
    
  
Total current assets
   
 
42,849
 
   
 
54,769
 
Property and equipment, net
   
 
21,164
 
   
 
22,553
 
Other assets
   
 
451
 
   
 
341
 
Intangibles, net
   
 
4,104
 
   
 
4,300
 
Goodwill
   
 
78,272
 
   
 
98,995
 
Notes receivable
   
 
—  
 
   
 
5,000
 
Net noncurrent assets of discontinued operations
   
 
30,453
 
   
 
58,725
 
    
  
Total assets
   
$
177,293
 
   
$
244,683
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities:
                  
Accounts payable
   
$
3,778
 
   
$
6,465
 
Accrued expenses
   
 
14,160
 
   
 
17,426
 
Customer deposits
   
 
2,614
 
   
 
4,961
 
Current portion of self-insurance reserves
   
 
1,114
 
   
 
1,296
 
Current portion of settlement obligation
   
 
9,000
 
   
 
—  
 
Current portion of debt
   
 
75,848
 
   
 
27,035
 
    
  
Total current liabilities
   
 
106,514
 
   
 
57,183
 
Self-insurance reserves, less current portion
   
 
1,146
 
   
 
1,475
 
Settlement obligations, less current portion
   
 
9,000
 
   
 
18,000
 
Debt, less current portion
   
 
—  
 
   
 
77,114
 
    
  
Total liabilities
   
 
116,660
 
   
 
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
   
 
(96,553
)
   
 
(66,275
)
Treasury stock at cost: 2,180,600 shares
   
 
(20,000
)
   
 
(20,000
)
    
  
Total shareholders’ equity
   
 
60,633
 
   
 
90,911
 
    
  
Total liabilities and shareholders’ equity
   
$
177,293
 
   
$
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
September 30,
     
Nine Months Ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues
   
$
30,108
 
   
$
32,791
 
   
$
96,038
 
   
$
106,045
 
Cost of services
   
 
12,531
 
   
 
14,704
 
   
 
41,834
 
   
 
47,902
 
    
  
  
  
Gross margin
   
 
17,577
 
   
 
18,087
 
   
 
54,204
 
   
 
58,143
 
Costs and expenses:
                                    
Operating
   
 
13,957
 
   
 
31,460
 
   
 
45,338
 
   
 
64,060
 
Corporate general and administrative
   
 
674
 
   
 
9,155
 
   
 
2,409
 
   
 
11,677
 
Depreciation and amortization
   
 
1,363
 
   
 
9,667
 
   
 
3,988
 
   
 
14,042
 
Final PIMMS severance costs
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
2,523
 
    
  
  
  
Operating income (loss)
   
 
1,583
 
   
 
(32,195
)
   
 
2,469
 
   
 
(34,159
)
Interest expense, net
   
 
2,047
 
   
 
1,101
 
   
 
5,401
 
   
 
2,877
 
Other expense
   
 
—  
 
   
 
—  
 
   
 
1,775
 
   
 
—  
 
    
  
  
  
Loss from continuing operations before income taxes
   
 
(464
)
   
 
(33,296
)
   
 
(4,707
)
   
 
(37,036
)
Income tax benefit
   
 
—  
 
   
 
(3,489
)
   
 
—  
 
   
 
(4,985
)
    
  
  
  
Loss from continuing operations
   
 
(464
)
   
 
(29,807
)
   
 
(4,707
)
   
 
(32,051
)
    
  
  
  
Discontinued operations:
                                    
Income (loss) from discontinued operations, net of taxes
                                    
European specialized staffing services businesses
   
 
2,363
 
   
 
(7,483
)
   
 
(739
)
   
 
(7,508
)
Loss on sale of businesses, net of taxes
                                    
European specialized staffing services businesses
   
 
—  
 
   
 
(25,001
)
   
 
(4,109
)
   
 
(25,001
)
U.S. and European aviation and facility services businesses
   
 
—  
 
   
 
(8,326
)
   
 
—  
 
   
 
(8,326
)
    
  
  
  
Income (loss) from discontinued operations
   
 
2,363
 
   
 
(40,810
)
   
 
(4,848
)
   
 
(40,835
)
    
  
  
  
Net income (loss) before cumulative effect of change in accounting principle
   
 
1,899
 
   
 
(70,617
)
   
 
(9,555
)
   
 
(72,886
)
Cumulative effect of change in accounting principle
   
 
—  
 
   
 
—  
 
   
 
(20,723
)
   
 
—  
 
    
  
  
  
Net income (loss)
   
$
1,899
 
   
$
(70,617
)
   
$
(30,278
)
   
$
(72,886
)
    
  
  
  
Basic and diluted income (loss) per share:
                                    
Loss from continuing operations
   
$
(0.03
)
   
$
(1.95
)
   
$
(0.31
)
   
$
(2.09
)
Income (loss) from discontinued operations
   
$
0.15
 
   
$
(2.68
)
   
$
(0.32
)
   
$
(2.67
)
Cumulative effect of change in accounting principle
   
$
—  
 
   
$
—  
 
   
$
(1.36
)
   
$
—