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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
[x] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarter period ended April 1, 2001.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
Commission file number 1-10893
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Ablest Inc.
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(Exact name of registrant as specified in its charter)
Delaware 65-0978462
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1901 Ulmerton Road, Suite 300
Clearwater, Florida 33762
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(Address of principal executive offices) (Zip Code)
727-299-1200
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(Registrant's telephone number, including area code)
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 - April 23, 2001.
Common stock, $.05 par value 2,935,132
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(Class) (Outstanding shares)
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ABLEST INC. AND SUBSIDIARIES
Index
Part I
Financial Information
Condensed Balance Sheets - April 1, 2001 - (Unaudited) and
December 31, 2000 3
Condensed Statements of Operations - (Unaudited) Thirteen week period
ended April 1, 2001 and fourteen week period ended April 2, 2000 4
Condensed Statements of Cash Flows - (Unaudited) Thirteen week period
ended April 1, 2001 and fourteen week period ended April 2, 2000 5
Notes to Condensed Financial Statements 6 - 8
Management's Discussion and Analysis of the Results of Operations and 9 - 11
Financial Condition
Part II
Other Information 12
Signatures 13
* * * * *
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Part I-Financial Information
ABLEST INC.
Condensed Balance Sheets
(In thousands, except share data)
April 1, December 31,
2001 2000
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(Unaudited) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,094 406
Receivables 12,710 14,629
Prepaid expenses and other 617 359
Deferred income taxes 2,549 2,549
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Total current assets 16,970 17,943
Net property, plant and equipment 1,824 1,861
Deferred income taxes 105 105
Intangible assets, net 4,489 4,576
Net assets of discontinued operations (note 5) 283 274
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$ 23,671 24,759
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 422 487
Accrued expenses 4,460 4,635
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Total current liabilities 4,882 5,122
Long-term debt, excluding current installments -- --
Other liabilities 85 452
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Total liabilities 4,967 5,574
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Stockholders' equity (note 3):
Preferred stock of $.05 par value. Authorized
500,000 shares, none issued -- --
Common stock of $.05 par value. Authorized
7,500,000 shares; issued 3,293,405 shares
for both 2001 and 2000 165 165
Additional paid-in capital 4,914 4,914
Retained earnings 15,667 16,168
Less notes receivable from stock sale (235) (235)
Less unearned restricted stock (188) (215)
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20,323 20,797
Less cost of common stock in treasury: 358,273 and
356,791 shares for 2001 and 2000, respectively (1,619) (1,612)
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Total stockholders' equity 18,704 19,185
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$ 23,671 24,759
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See accompanying notes to condensed financial statements.
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ABLEST INC.
Condensed Statements of Operations
(Unaudited)
(In thousands, except share data)
Thirteen Fourteen
Week period Week period
Ended Ended
April 1, April 2,
2001 2000
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Net service revenues $ 21,846 25,893
Cost of services 17,312 20,021
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Gross profit 4,534 5,872
Selling, general and administrative expenses 5,216 5,663
Amortization of intangible assets 91 92
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Operating income (773) 117
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Other income (expense):
Interest income (expense), net 10 (106)
Miscellaneous, net 5 128
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Total other income 15 22
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Income (loss) before income taxes from continuing operations (758) 139
Income tax expense (benefit) (257) 64
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Net earnings (loss) from continuing operations (501) 75
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Discontinued operations (note 5):
Adjustment of loss on sale of discontinued operations,
net of income taxes -- 200
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-- 200
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Net earnings (loss) $ (501) 275
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Basic and diluted net earnings (loss) per share:
Continuing operations $ (.17) .03
Adjustment to loss on sale of discontinued operations -- .07
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$ (.17) .10
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Weighted average number of common shares outstanding 2,935,959 2,882,685
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See accompanying notes to condensed financial statements.
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ABLEST INC.
Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Thirteen week Fourteen week
period ended period ended
April 1, April 2,
2001 2000
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Cash flows from operating activities:
Net (loss) earnings from continuing operations $ (501) $ 75
Adjustments to reconcile net (loss) earnings to net cash
provided by operating activities:
Depreciation 254 302
Amortization of intangible assets 91 92
Gain on disposal of property, plant
and equipment, net -- (114)
Deferred income taxes -- (118)
Changes in assets and liabilities (see below) 1,050 1,048
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Net cash provided by operating activities
of continuing operations 894 1,285
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Cash flows from investing activities:
Additions to property, plant and equipment (217) (192)
Proceeds from disposal of property, plant and equipment -- 364
Acquisitions and earnout payments, net of cash acquired -- (225)
Cash transfer from discontinued operations (Note 5) -- 8,683
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Net cash (used in) provided by investing activities of
Continuing operations (217) 8,630
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Cash flows from financing activities:
Proceeds from bank line of credit borrowings 50 4,800
Repayment of bank line of credit borrowings (50) (14,100)
Employee stock awards 27 --
Purchase of treasury shares (7) --
Proceeds from exercise of stock options -- 78
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Net cash provided by (used in) financing activities
of continuing operations 20 (9,222)
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Net increase in cash from continuing operations 697 693
Net (decrease) increase in cash from discontinued operations (note 5) (9) 8,683
Less amount transferred to continuing operations -- (8,683)
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Net increase in cash 688 693
Cash and cash equivalents at beginning of period 406 562
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Cash and cash equivalents at end of period $ 1,094 1,255
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Changes in assets and liabilities providing (using) cash:
Receivables 1,919 2,000
Prepaid expenses and other (258) (1,466)
Accounts payable (65) 691
Accrued expenses (175) (8)
Other assets (4) --
Other liabilities (367) (169)
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Total $ 1,050 1,048
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See accompanying notes to condensed financial statements
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ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
1. In the opinion of management of Ablest Inc (the Company), the accompanying
condensed consolidated financial statements contain all normal recurring
adjustments necessary to fairly present the Company's consolidated
financial position as of April 1, 2001 and the results of its operations
and cash flows for the thirteen week period ended April 1, 2001 and the
fourteen week period ended April 2, 2000.
2. The results of operations for the thirteen week period ended April 1, 2001
are not necessarily indicative of the results to be expected for the full
year.
3. Stockholders' Equity. The changes in stockholders' equity for the thirteen
week period ended April 1, 2001 are summarized as follows (in thousands,
except shares):
Additional Unearned Receivable Total
Common Paid-in Retained Treasury Stock Restricted Stock Stockholders'
Stock Capital Earnings Shares Amount Stock Sale equity
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Balance at December 31, 2000 $ 165 $ 4,914 $ 16,168 356,791 $(1,612) (215) (235) $ 19,185
Net earnings - - (501) - - - - (501)
Stock compensation awards - - - - - 27 - 27
Stock repurchase program - - - 1,482 (7) - - (7)
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Balance at April 1, 2001 $ 165 $ 4,914 $ 15,667 358,273 $ (1,619) (188) (235) $ 18,704
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4. Stock Options. For the 13 week period ended April 1, 2001, no stock options
were granted and none expired. As of April 1, 2001 and December 31, 2000,
the Company had exercisable options outstanding to former employees to
purchase 41,479 common shares, respectively at prices ranging from $6.94 to
$10.13 per share.
5. Discontinued Operations. On March 13, 2000 the Company sold substantially
all of its industrial maintenance segment to Onyx Industrial Services, Inc.
(Onyx). The base selling price was $19,700,000 in cash plus the assumption
by Onyx of certain trade liabilities of approximately $2,600,000.
The terms of the sale include certain other provisions, which could result
in additional disposition costs for the Company. Such costs include
environmental remediation at certain specific industrial maintenance
branches, reimbursement of any uncollectible accounts receivable acquired
by Onyx and the payment of certain severance costs. In the fourth quarter
of 1999, the Company recorded an estimated net loss from the sale of its
industrial maintenance operations of $7,086,000. Such loss included
management's best estimate of the sale proceeds, the direct costs of the
transaction, estimated costs associated with the contingencies contained in
the agreement and the basis of disposed net assets as of the measurement
date. At April 1, 2001, the remaining accrued loss on disposal is
approximately $986,000 and represents management's current best estimate of
remaining costs associated with the transaction.
During the first quarter of 2000, the Company recorded an adjustment to the
previously recorded loss on the sale of $200,000 (net of taxes of $241,000)
as actual amounts related to the transaction were compared to the fourth
quarter estimates.
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ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
The net assets of discontinued operations at April 1, 2001 represent
residual assets such as certain remaining property held for sale and
deferred tax assets. These assets are partially offset by amounts due Onyx
for certain expenditures paid by Onyx but which occurred prior to the
closing and liabilities, primarily consisting of the remaining accrual for
the loss on disposal. The deferred tax assets are expected to be utilized
with the filing of the Company's 2000 tax return.
The proceeds received from the sale were used to discharge bank debt
allocated to industrial maintenance and pay various transaction costs. The
remaining cash of $8,683,000 was transferred in March 2000 to continuing
operations and primarily used to repay debt allocated to staffing services.
6. Industry Segments. Effective with the March 13, 2000 sale of its industrial
maintenance operations, the Company's sole business is in providing
staffing services on a temporary and contract basis. Management of the
Company views its operations as having two operating segments: Commercial
staffing services, consisting mostly of clerical and light industrial
staffing services and Technology staffing services, consisting mostly of
programmers, and systems documentation services. Staffing services for both
segments are provided throughout the eastern United States and select
southwestern U.S. markets.
Corporate assets not allocated consist primarily of cash equivalents. There
were no cash equivalents as of April 1, 2001 or December 31, 2000.
Operating segment data as of and for the thirteen and fourteen week periods
ended April 1, 2001 and April 2, 2000, respectively, are provided on the
following page.
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ABLEST INC.
Notes to Condensed Financial Statements, continued
(Unaudited)
6 Industry Segments, continued.
Thirteen Fourteen
Week period Week period
Ended Ended
April 1, April 2,
2001 2000
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Commercial Staffing Services:
Net revenues $18,616 21,677
Cost of services 14,757 17,004
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Gross profit dollars 3,859 4,673
Selling, general & administrative 3,305 2,996
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Operating income 554 1,677
Amortization -- --
Receivables $10,580 9,764
Technology Staffing Services:
Net revenues 3,230 4,216
Cost of services 2,555 3,123
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Gross profit dollars 675 1,093
Selling, general & administrative 597 808
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Operating income 78 285
Amortization 91 91
Receivables $ 1,831 1,940
Operating income on this segment statement differs from the operating income
reported on the Statement of Operations because it does not include some
corporate expenses. These corporate items include costs associated with
providing executive, administrative, information technology and human resource
services to field operations. These costs are not allocated for segment purposes
but have been fully charged to continuing operations in the statements of
operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
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 which could cause actual results to differ materially from
those anticipated.
On March 13, 2000, the Company sold substantially all of the assets of its
United States industrial maintenance operations and the stock of its wholly
owned Canadian subsidiary, C. H. Heist, Ltd., to Onyx Industrial Services, Inc.
Taken together, these operations comprised substantially all of the assets of
the Company's industrial maintenance business.
The base selling price was $19.7 million in cash plus the assumption by Onyx of
certain trade liabilities of approximately $2.6 million.
For financial reporting purposes, the Company's industrial maintenance business
has been classified as a discontinued operation through the sale closing date of
March 13, 2000. The estimated loss on disposal, which included estimated
operating results through the sale date, was recorded in the fourth quarter of
1999. The following discussion and analysis of operations and financial
condition pertains to the Company's staffing services segment, which constitutes
the continuing operations. A separate section labeled discontinued operations is
included at the end of this discussion and pertains to the industrial
maintenance business.
Results of Operations:
The quarter and year to date period ended April 1, 2001 was comprised of 13
weeks compared to 14 weeks for the quarter and year to date period ended April
2, 2000.
Service revenues decreased by $4.1 million or 15.6% to $21.8 million from $25.9
million for the quarter and year to date period ended April 1, 2001, compared to
the same period ended April 2, 2000. Service revenues in the commercial staffing
segment decreased by $3.1 million or 14.1% to $18.6 million from $21.7 million
during the current period compared to one year earlier. Service revenues in the
Company's information technology staffing segment declined by $1.0 million or
23.3% to $3.2 million from $4.2 million for the current quarter and year to date
period, compared to one year earlier. Both industry segments are being
negatively impacted by the recent downturn in the United States economy. The
weakening economy is resulting in many of our customers incurring cutbacks and
layoffs. Temporary staff is normally the first group to be impacted by these
events. The information technology staffing segment has been particularly
impacted by the decline in the Internet professional services industry. This
decline includes a lessening of demand for permanent placements as well as
temporary or contract services. The decline for permanent placements has
resulted in a decrease of approximately $242,000 in placement fees in the
current quarter, as compared to one year earlier.
Also contributing to the decline in service revenues for both segments was that
the current fiscal quarter was comprised of 13 weeks compared to 14 weeks for
the same quarter in the prior year.
Gross profit decreased by $1.3 million or 22.8% to $4.5 million from $5.9
million, over the same period one year earlier. Gross margin declined by 1.9
percentage points to 20.8% from 22.7% for the current period, compared to one
year earlier. Gross profit in the commercial staffing services segment declined
by $814,000 or 17.4% to $3.9 million from $4.7 million for the current period,
compared to one year earlier. Gross margin for the commercial staffing services
segment declined by 0.9 percentage points to 20.7% from 21.6%, for the same
period. The decline in gross profit is the result of the decline in service
revenue noted previously, while the decline in gross margin is partially
attributable to an increase in the percentage of total service revenues being
generated by the Company's Vendor-on-Premises (Point Source) programs that
generate lower margins on higher volumes. These services represented 20.6% of
total service revenues during the current period, compared to 15.6% of total
service revenues for the same period in the prior year.
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Results of Operations, continued:
Gross profit in the Company's information technology staffing segment decreased
by approximately $418,000 or 38.2% to $675,000 from $1.1 million for the quarter
and year to date period ended April 1, 2001 compared to the same period one year
earlier. Gross margin declined by 5.0 percentage points to 20.9% from 25.9% for
the current quarter and year to date period compared to one year earlier. The
decline in gross profit is attributed to the decline in service revenues noted
above while the decline in gross margin is attributed to the decline in
permanent placement fees which generate higher gross margins. Gross margin or
information technology services, excluding permanent placement fees, declined by
0.6 percentage points for the current period, compared to the same period one
year earlier.
Selling, general and administrative expense, exclusive of amortization expense,
declined by approximately $447,000 or 7.9% to $5.2 million from $5.7 million one
year earlier. Contributing to this decrease is a reduction in corporate expenses
for the current quarter of approximately $390,000, compared to the same period
one year earlier. During the first quarter of the prior year the company was in
the process of selling its industrial maintenance business and relocating its
former administrative office from Buffalo, New York to Clearwater, Florida.
Expenses during that time period were higher than normal as new staff was hired
and some services duplicated during this transition period. Having one fewer
week in the Company's fist quarter ended April 1, 2001, as compared to the prior
year's first quarter ended April 2, 2000, also contributed to the decrease in
selling, general and administrative expenses.
Other income, net, decreased by $7,000 to $15,000 during the current quarter and
year to date period, from $22,000 for the same period one year earlier.
The effective tax rate for the current quarter and year to date period is a
benefit of 33.9% compared to an expense of 46.0%. The effective tax rate is the
result of the multiple taxing jurisdictions in which the company operates and
the non-deductibility for tax purposes of certain expenses incurred by the
company.
Financial Condition:
The following financial information is provided as of a balance sheet date of
April 1, 2001.
The quick ratio was 2.8 to 1 and 2.9 to 1 at April 1, 2001 and December 31,
2000, respectively, and the current ratio was 3.5 to 1, for the same respective
periods. Net working capital decreased by $733,000 during the current period.
Contributing to the decrease was a reduction in accounts receivable of $1.9
million due to the decreased level of revenue being generated during this
period. This decrease was partially offset by an increase in cash of $688,000
and in prepaid expenses of $258,000. The increase in prepaid expenses is
attributable to the renewal of the Company's insurance program for the current
year. Reference should be made to the Statement of Cash Flows, which details the
sources and uses of cash.
Open credit commitments at April 1, 2001, were $5.0 million. In January of the
current year, the Company reduced its then existing open credit commitment from
$20 million to $5 million to be more in line with the Company's anticipated
needs over the next six months. The Company has begun conversations with its
financial lenders to secure a new, long term, operating line of credit.
Capital expenditures for the current quarter and year to date period were
approximately $217,000. Approximately $200,000 of the total additions pertains
to new front office automation and applicant matching software that is being
implemented throughout the Company's branch operations. It is anticipated that
existing funds, cash flows from operations and available borrowings will be
sufficient to cover working capital and capital expenditures for fiscal 2001.
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Discontinued Operations:
During the current period, there were no adjustments made to the previously
estimated loss on sale of discontinued operations. The prior year adjustment to
the loss on sale of discontinued operations of approximately $200,000, consisted
primarily of a reduction in anticipated operating losses from the measurement
date of September 26, 1999, to the disposal date of March 13, 2000.
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Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibits.
None.
(B) Reports on Form 8-K:
On April 3, 2001, the Company filed a report on Form 8-K
regarding a Change in Registrant's Certifying Accountants to
Arthur Andersen LLP from KPMG LLP effective for the fiscal
year ending December 30, 2001.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Ablest Inc.
(Registrant)
Date: May 7, 2001 /s/ Mark P. Kashmanian
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Mark P. Kashmanian
Chief Accounting Officer
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