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 March 31, 2003
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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
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 May 1, 2003.
TABLE OF CONTENTS
| PAGE | ||||
| PART I—FINANCIAL INFORMATION | ||||
| Item 1. |
Financial Statements |
|||
| Condensed Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 |
1 | |||
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002 |
2 | |||
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| Item 3. |
16 | |||
| Item 4. |
17 | |||
| PART II—OTHER INFORMATION | ||||
| Item 1. |
18 | |||
| Item 6. |
18 | |||
| 20 | ||||
| 21 | ||||
ITEM 1—FINANCIAL STATEMENTS
AHL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
|
(Unaudited |
) |
|||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ |
3,716 |
|
$ |
4,506 |
| ||
| Accounts receivable |
|
40,902 |
|
|
34,106 |
| ||
| Unbilled services |
|
4,771 |
|
|
5,147 |
| ||
| Work in process |
|
937 |
|
|
1,218 |
| ||
| Reimbursable customer expenses |
|
8,313 |
|
|
4,822 |
| ||
| Prepaid expenses and other |
|
6,394 |
|
|
5,610 |
| ||
| Income taxes receivable |
|
2,748 |
|
|
2,762 |
| ||
| Net assets of discontinued operations |
|
438 |
|
|
1,461 |
| ||
| Total current assets |
|
68,219 |
|
|
59,632 |
| ||
| Property and equipment, net |
|
24,170 |
|
|
24,208 |
| ||
| Other assets |
|
385 |
|
|
375 |
| ||
| Intangibles, net |
|
3,994 |
|
|
4,039 |
| ||
| Goodwill |
|
63,396 |
|
|
62,048 |
| ||
| Total assets |
$ |
160,164 |
|
$ |
150,302 |
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ |
4,587 |
|
$ |
7,102 |
| ||
| Accrued payroll and related benefits |
|
20,730 |
|
|
18,117 |
| ||
| Accrued expenses |
|
19,299 |
|
|
14,322 |
| ||
| Customer deposits |
|
6,255 |
|
|
3,805 |
| ||
| Current portion of self-insurance reserves |
|
892 |
|
|
903 |
| ||
| Current portion of settlement obligations |
|
18,000 |
|
|
18,000 |
| ||
| Current portion of debt |
|
76,150 |
|
|
72,696 |
| ||
| Total current liabilities |
|
145,913 |
|
|
134,945 |
| ||
| Self-insurance reserves, less current portion |
|
1,424 |
|
|
1,385 |
| ||
| Other non current liabilities |
|
1,464 |
|
|
1,254 |
| ||
| Total liabilities |
|
148,801 |
|
|
137,584 |
| ||
| 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 |
|
(143,610 |
) |
|
(141,813 |
) | ||
| Foreign currency translation adjustment |
|
(2,213 |
) |
|
(2,655 |
) | ||
| Treasury stock at cost: 2,180,600 shares |
|
(20,000 |
) |
|
(20,000 |
) | ||
| Total shareholders’ equity |
|
11,363 |
|
|
12,718 |
| ||
| Total liabilities and shareholders’ equity |
$ |
160,164 |
|
$ |
150,302 |
| ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share data)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues |
$ |
69,376 |
|
$ |
59,489 |
| ||
| Cost of services |
|
37,488 |
|
|
33,071 |
| ||
| Gross margin |
|
31,888 |
|
|
26,418 |
| ||
| Costs and expenses: |
||||||||
| Operating |
|
27,946 |
|
|
24,685 |
| ||
| Corporate general and administrative |
|
583 |
|
|
879 |
| ||
| Depreciation and amortization |
|
1,652 |
|
|
1,437 |
| ||
| Operating income (loss) |
|
1,707 |
|
|
(583 |
) | ||
| Interest expense, net |
|
2,775 |
|
|
2,095 |
| ||
| Other expense, net |
|
623 |
|
|
— |
| ||
| Loss from continuing operations before income taxes |
|
(1,691 |
) |
|
(2,678 |
) | ||
| Income tax provision |
|
106 |
|
|
— |
| ||
| Loss from continuing operations |
|
(1,797 |
) |
|
(2,678 |
) | ||
| Loss from discontinued operations |
|
— |
|
|
(641 |
) | ||
| Net loss before cumulative effect of change in accounting principle |
|
(1,797 |
) |
|
(3,319 |
) | ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(20,723 |
) | ||
| Net loss |
$ |
(1,797 |
) |
$ |
(24,042 |
) | ||
| Basic and diluted loss per share: |
||||||||
| Loss from continuing operations |
$ |
(0.12 |
) |
$ |
(0.18 |
) | ||
| Loss from discontinued operations |
|
— |
|
|
(0.04 |
) | ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
(1.36 |
) | ||
| Net loss |
$ |
(0.12 |
) |
$ |
(1.58 |
) | ||
| Basic and diluted weighted average common shares |
|
15,247 |
|
|
15,247 |
| ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
| Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ |
(1,797 |
) |
$ |
(24,042 |
) | ||
| Less: Loss from discontinued operations |
|
— |
|
|
(641 |
) | ||
| Loss from continuing operations before cumulative effect of change in accounting principle |
|
(1,797 |
) |
|
(23,401 |
) | ||
| Cumulative effect of change in accounting principle |
|
— |
|
|
20,723 |
| ||
| Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities of continuing operations: |
||||||||
| Depreciation and amortization |
|
1,652 |
|
|
1,437 |
| ||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable and unbilled services, net |
|
(5,663 |
) |
|
(891 |
) | ||
| Work in process, prepaid expenses and other |
|
(4,395 |
) |
|
(1,711 |
) | ||
| Accounts payable |
|
(2,554 |
) |
|
(3,532 |
) | ||
| Accrued expenses and other current liabilities |
|
9,227 |
|
|
4,419 |
| ||
| Self-insurance reserves |
|
28 |
|
|
15 |
| ||
| Income taxes receivable |
||||||||