PART I. – FINANCIAL INFORMATION
Item 1. – Financial Statements
ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS |
| | December 31, 2000 | | September 30, 2001 | |
| | | | (Unaudited) | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 114 | | $ | 76 | |
Short-term investment | | 639 | | | |
Trade accounts receivable, net of allowance for doubtful accounts | | 57,124 | | 40,350 | |
Prepaid expenses | | 1,325 | | 1,289 | |
Income taxes receivable | | 7,059 | | 2,307 | |
Other receivables | | 295 | | 263 | |
Deferred income taxes | | 1,030 | | 1,179 | |
Total current assets | | 67,586 | | 45,464 | |
Property and equipment: | | | | | |
Office equipment | | 8,109 | | 8,240 | |
Furniture and fixtures | | 2,404 | | 2,389 | |
Software | | 17,739 | | 19,202 | |
Leasehold improvements | | 1,973 | | 1,977 | |
| | 30,225 | | 31,808 | |
Less accumulated depreciation and amortization | | (12,110 | ) | (16,121 | ) |
Net property and equipment | | 18,115 | | 15,687 | |
Other assets: | | | | | |
Goodwill, net of amortization | | 2,799 | | 2,742 | |
Other assets | | 1,119 | | 952 | |
Total other assets | | 3,918 | | 3,694 | |
Total assets | | $ | 89,619 | | $ | 64,845 | |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
Current liabilities: | | | | | |
Cash overdraft | | $ | 5,512 | | $ | 3,296 | |
Short-term debt | | 43,966 | | 30,585 | |
Accounts payable | | 14,053 | | 12,011 | |
Accrued payroll and related expenses | | 10,927 | | 7,720 | |
Accrued expenses | | 5,908 | | 3,841 | |
Total current liabilities | | 80,366 | | 57,453 | |
Other liabilities | | 294 | | 318 | |
Deferred income taxes | | 1,316 | | 1,316 | |
Total liabilities | | 81,976 | | 59,087 | |
Stockholders' equity: | | | | | |
Preferred Stock, $.01 par value, 1,000,000 shares authorized, none issued and outstanding | | — | | — | |
Common Stock, $.01 par value, 50,000,000 shares authorized, 17,390,594 and 17,334,103 shares issued at December 31, 2000 and September 30, 2001, respectively | | 174 | | 174 | |
Additional paid-in capital | | 27,425 | | 27,415 | |
Deferred compensation | | (318 | ) | (130 | ) |
Accumulated other comprehensive income (loss) | | 172 | | (38 | ) |
Accumulated deficit | | (15,013 | ) | (16,866 | ) |
| | 12,440 | | 10,555 | |
Less: Treasury stock, at cost, 585,000 shares at December 31, 2000 and September 30, 2001 | | (4,797 | ) | (4,797 | ) |
Total stockholders' equity | | 7,643 | | 5,758 | |
Total liabilities and stockholders' equity | | $ | 89,619 | | $ | 64,845 | |
See accompanying Notes to Consolidated Financial Statements
ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |
| | 2000 | | 2001 | | 2000 | | 2001 | |
| | (Unaudited) | | (Unaudited) | |
Revenue | | $ | 64,372 | | $ | 46,830 | | $ | 200,748 | | $ | 157,450 | |
Cost of services | | 44,250 | | 32,744 | | 141,545 | | 111,256 | |
Gross profit | | 20,122 | | 14,086 | | 59,203 | | 46,194 | |
Operating expenses | | | | | | | | | |
Selling, general and administrative expenses | | 19,265 | | 12,520 | | 59,170 | | 41,576 | |
Depreciation and amortization | | 1,955 | | 1,294 | | 5,688 | | 4,132 | |
Total operating expenses | | 21,220 | | 13,814 | | 64,858 | | 45,708 | |
Income (loss) from operations | | (1,098 | ) | 272 | | (5,655 | ) | 486 | |
Other income (expense), net | | (2,173 | ) | (1,048 | ) | (3,356 | ) | (2,922 | ) |
Loss before income taxes | | (3,271 | ) | (776 | ) | (9,011 | ) | (2,436 | ) |
Income taxes | | (1,050 | ) | — | | (3,134 | ) | (583 | ) |
| | | | | | | | | |
Net loss | | $ | (2,221 | ) | $ | (776 | ) | $ | (5,877 | ) | $ | (1,853 | ) |
Net loss per share: | | | | | | | | | |
Basic and diluted | | $ | (0.14 | ) | $ | (0.05 | ) | $ | (0.38 | ) | $ | (0.11 | ) |
| | | | | | | | | |
Shares used to compute net loss per share: | | | | | | | | | |
Basic and diluted | | 15,506 | | 16,679 | | 15,509 | | 16,763 | |
See accompanying Notes to Consolidated Financial Statements
ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(In thousands)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2000 | | 2001 | | 2000 | | 2001 | |
| | (Unaudited) | | (Unaudited) | |
Net loss | | $ | (2,221 | ) | $ | (776 | ) | $ | (5,877 | ) | $ | (1,853 | ) |
Other comprehensive income (loss): | | | | | | | | | |
Foreign currency translation adjustment, net of tax | | 9 | | 8 | | 9 | | 11 | |
Unrealized holding gain on security, net of tax: | | | | | | | | | |
Reclassification adjustment for gain included in net loss, net of tax | | — | | — | | — | | (221 | ) |
Other comprehensive income (loss) | | 9 | | 8 | | 9 | | (210 | ) |
| | | | | | | | | |
Comprehensive loss | | $ | (2,212 | ) | $ | (768 | ) | $ | (5,868 | ) | $ | (2,063 | ) |
| | | | | | | | | |
See accompanying Notes to Consolidated Financial Statements
ALTERNATIVE RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | Nine Months Ended September 30, | |
| | 2000 | | 2001 | |
| | (Unaudited) | |
Cash flows from operating activities: | | | | | |
Net loss | | $ | (5,877 | ) | $ | (1,853 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | |
Depreciation and amortization | | 5,688 | | 4,132 | |
Deferred income taxes | | — | | (149 | ) |
Gain on sale of interest rate swap | | (1,100 | ) | — | |
Realized gain on sale of security, net of tax | | — | | (221 | ) |
Amortization of deferred compensation on restricted shares | | — | | 188 | |
Provision for doubtful accounts | | — | | 350 | |
Change in assets and liabilities: | | | | | |
Trade accounts receivable | | 14,135 | | 16,424 | |
Prepaid expenses | | (811 | ) | 36 | |
Other receivables | | 183 | | 32 | |
Other assets | | (517 | ) | 167 | |
Accounts payable | | (2,054 | ) | (2,042 | ) |
Accrued payroll and related expenses | | (4,014 | ) | (3,207 | ) |
Accrued expenses and other liabilities | | (3,856 | ) | (2,043 | ) |
Income taxes receivable | | 834 | | 4,752 | |
Net cash provided by operating activities | | 2,611 | | 16,566 | |
| | | | | |
Cash flows from investing activities: | | | | | |
Purchases of property and equipment | | (1,847 | ) | (1,647 | ) |
Redemption of available-for-sale securities | | — | | 639 | |
| | | | | |
Net cash used in investing activities | | (1,847 | ) | (1,008 | ) |
| | | | | |
Cash flows from financing activities: | | | | | |
Payments received on stock options exercised | | 52 | | — | |
Proceeds from short-term debt | | 26,105 | | 212,263 | |
Payments on short-term debt | | (27,512 | ) | (225,644 | ) |
Proceeds from sale of interest rate swap | | 1,100 | | — | |
Repurchase of common stock | | (94 | ) | — | |
Contributions to employee stock purchase plan | | (100 | ) | (57 | ) |
Issuance of common stock under employee stock purchase plan | | 200 | | 47 | |
Cash overdraft | | (892 | ) | (2,216 | ) |
Net cash used in financing activities | | (1,141 | ) | (15,607 | ) |
Effect of exchange rate changes on cash and cash equivalents | | 9 | | 11 | |
| | | | | |
Net increase (decrease) in cash and cash equivalents | | (368 | ) | (38 | ) |
Cash and cash equivalents at beginning of period | | 374 | | 114 | |
Cash and cash equivalents at end of period | | $ | 6 | | $ | 76 | |
Supplemental disclosures of cash flow information: | | | | | |
Cash paid for interest | | $ | 3,198 | | $ | 3,162 | |
Cash paid for income taxes | | 257 | | 133 | |
See accompanying Notes to Consolidated Financial Statements
ALTERNATIVE RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim consolidated financial statements presented are unaudited, but in the opinion of management, have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a basis consistent with those of the annual financial statements. Such interim consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2001. The interim consolidated financial statements should be read in connection with the audited consolidated financial statements for the year ended December 31, 2000, included in the December 31, 2000 Form 10-K of Alternative Resources Corporation (“ARC” or the “Company”).
2. Computation of Earnings (Loss) per Share
Basic earnings (loss) per share are based on the weighted average number of common shares outstanding for the period. Diluted earnings per share is based on the weighted average number of common shares outstanding and includes the dilutive effect of unexercised vested stock options using the treasury stock method. Dilutive securities have not been included in the weighted average shares used for the calculation of earnings per share in periods of net loss because the effect of such securities would be anti-dilutive. At September 30, 2001 and 2000, potential dilutive securities consisted of options to purchase 16 and 113 thousand shares of common stock, respectively.
3. Recently Issued Accounting Pronouncements
In June 1999, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Certain Hedging Activities.” In June 2000, the FASB issued SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment of SFAS No. 133.” SFAS No. 133 and SFAS No. 138 require that all derivative instruments be recorded on the balance sheet at their respective fair values. SFAS No.133 and SFAS No. 138 are effective for all fiscal quarters of all fiscal years beginning after June 30, 2000; the Company adopted SFAS No. 133 and SFAS No. 138 on January 1, 2001, which currently have no impact on the Company’s financial position or results of operations as the Company has not utilized derivative instruments or entered into any hedging transactions that are covered by those pronouncements.
4. Restructuring Charge – 2000
During the fourth quarter of 2000, the Company incurred a $0.5 million restructuring charge representing severance costs associated with the restructuring of the Company’s sales, recruiting, delivery and administrative support models. A total of 29 positions were eliminated, with 20 of them being administrative positions. This charge was a continuation of the 1998 restructuring, which was designed to optimize the branch field model.
The primary components of the restructuring charge can be summarized as follows:
| | Total | | 2000 | | Balance at | | 2001 | | Balance at | |
| | Initial | | Cash | | December | | Cash | | September | |
In thousands | | Reserve | | Payments | | 31, 2000 | | Payments | | 30, 2001 | |
Severance | | $ | 535 | | $ | (246 | ) | $ | 289 | | $ | (279 | ) | $ | 10 | |
| | | | | | | | | | | | | | | | |
The remainder of the unpaid severance will be paid during the fourth quarter 2001.
5. Restructuring Charge – 1999
During the fourth quarter of 1999, the Company incurred a $4.1 million restructuring charge representing real estate and severance costs associated with re-engineering the Company's sales, recruiting and delivery models. This action was a natural extension of the changes announced in 1998, which were designed to optimize the existing branch field model, and entails a comprehensive shift to a model organized along the functional lines of sales, recruiting and delivery. The new model is more efficient in terms of meeting the demands of the Company's clients at a lower cost.
The primary components of the restructuring charge can be summarized as follows:
| | Total | | 1999 | | Balance at | | 2000 | | Balance at | | 2001 | | Balance at | |
| | Initial | | Cash | | December | | Cash | | December | | Cash | | September | |
In thousands | | Reserve | | Payments | | 31, 1999 | | Payments | | 31, 2000 | | Payments | | 30, 2001 | |
Real estate costs | | $ | 3,538 | | $ | (30 | ) | $ | 3,508 | | $ | (1,888 | ) | $ | 1,620 | | $ | (1,039 | ) | $ | 581 | |
Severance | | 630 | | (416 | ) | 214 | | (184 | ) | 30 | | (30 | ) | - | |
| | | | | | | | | | | | | | | |
Total | | $ | 4,168 | | $ | (446 | ) | $ | 3,722 | | $ | (2,072 | ) | $ | 1,650 | | $ | (1,069 | ) | $ | 581 | |
| | | | | | | | | | | | | | | |
The portion of the charge related to real estate costs, which totaled $3.5 million, relates to lease costs associated with vacating offices as the Company downsizes its office space requirements. Through a combination of adopting a more virtual office model and eliminating administrative functions that had been performed in the field offices, the Company relocated from most of its existing leased office space to smaller office space that will require 60% less square footage than what was in use. The costs associated with this charge related primarily to the present value of ongoing lease obligations for vacated offices net of anticipated sublease income. A portion of the charge also related to broker commissions and estimated leasehold improvement costs necessary to sublease vacated offices. The majority of the unpaid restructuring reserve as of September 30, 2001 relates to future lease obligations that will be paid over the next 4 years.
6. Short-term borrowings
During the second quarter of 2001, ARC and the lending syndicate executed amendments to the revolving credit agreement. The impact of these amendments was to extend the maturity date to January 1, 2002 and reduce the borrowing limit subject to pledged accounts receivable as collateral in consideration for waiver of existing financial loan covenants and modification of certain loan covenants. Additionally, the Company has two irrevocable standby letters of credit for $1,268,000, which expire on December 31, 2001.
Item 2. – Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Essentially all of the Company’s revenue is generated from information technology services that offer the benefits of outsourcing, while allowing information services operations managers to retain strategic control of their operations.
RESTRUCTURING AND OTHER CHARGES
During the fourth quarter of 2000, the Company recorded a $36.6 million charge. This charge was comprised of an impairment charge of $34.9 million related to goodwill, $1.2 million related to the write-off of excess assets, and $0.5 million related to severance costs.
During the fourth quarter of 1999, the Company recorded a $5.2 million charge. This charge was comprised of $3.5 million related to lease costs, $0.6 million related to severance costs, and $1.1 million related to the write-down of fixed asset values.
The results of the above mentioned restructuring and other charges is evidenced by the improvement of EBITDA noted below.
Third Quarter Fiscal 2001 Compared to Third Quarter Fiscal 2000
Revenue. Revenues consist of fees earned from ARC Staffing Management Services and ARC Technology Management Solutions. Revenue decreased $17.6 million or 27.3% from $64.4 million in 2000 to $46.8 million in 2001, primarily from the overall slowdown in IT spending as companies curtailed spending on IT investments in reaction to a soft economy. ARC Technology Management Solutions revenue decreased by $4.8 million or 23.6% from $20.4 million in 2000 to $15.6 million in 2001. The Company’s traditional staffing business revenue decreased by $12.7 million or 28.9% from $44.0 million in 2000 to $31.2 million in 2001.
Gross profit. Gross profit decreased by $6.0 million or 30.0% from $20.1 million in 2000 to $14.1 million in 2001. The decrease was primarily attributable to the reduction in revenue and a change in product line mix. As a percentage of revenues, gross profit decreased 1.2 percentage points from 31.3% in 2000 to 30.1% in 2001 due to an under utilization of technical resources on a major project with one customer. The major project situation was rectified early in the third quarter of 2001 with a contract renewal that includes minimum business levels or price increases. We believe the new agreement should restore the margins to historical levels.
Operating expenses. Operating expenses consist of sales and marketing costs, recruiting, retention and training costs, management and administrative costs, and depreciation and amortization. Operating expenses decreased by $7.4 million or 34.9% from $21.2 million in 2000 to $13.8 million in 2001. The operating expense decrease was attributable to the restructuring actions taken in 2000, which is reflected in reduced office space and lower headcount. As a percentage of revenues, operating expenses decreased by 3.4 percentage points from 32.9% in 2000 to 29.5% in 2001, primarily as a result of the actions described above.
Income (loss) from operations. Income from operations increased by $1.4 million from a loss of $1.1 million in 2000 to income of $0.3 million in 2001. The increase in income from operations was the result of reduced operating expenses partially offset by the lower revenue levels.
Other (income) expense, net. Other expense, net, consists principally of interest expense on the Company’s revolving credit facility. Other expense, net decreased by $1.1 million from an expense of $2.2 million in 2000 to an expense of $1.1 million in 2001. The decrease in other expense is primarily the result of a decrease in interest expense related to decreased debt levels and lower interest rates.
Earnings before interest, income taxes, depreciation and amortization. Earnings before interest, income taxes, depreciation and amortization (EBITDA) was $1.6 million for the quarter, which is comprised of loss before taxes of $(0.8) million plus depreciation and amortization of $1.3 million and net interest of $1.1 million. This compares to EBITDA of $0.9 million for the same three-month period in 2000. The increase is primarily due to having income from operations as compared to a loss from operations in the prior period.
First Nine Months Fiscal 2001 Compared to First Nine Months Fiscal 2000
Revenue. Revenue decreased $43.3 million or 21.6% from $200.7 million in 2000 to $157.4 million in 2001, primarily from the overall slowdown in IT spending as companies curtailed spending on IT investments in reaction to a soft economy. ARC Technology Management Solutions revenue decreased by $15.2 million or 24.8% from $61.4 million in 2000 to $46.2 million in 2001. The Company’s traditional staffing business revenue decreased by $28.1 million or 20.2% from $139.3 million in 2000 to $111.2 million in 2001.
Gross profit. Gross profit decreased by $13.0 million or 22.0% from $59.2 million in 2000 to $46.2 million in 2001. The decrease was primarily attributable to the reduction in revenue. As a percentage of revenues, gross profit decreased slightly from 29.5% in 2000 to 29.3% in 2001.
Operating expenses. Operating expenses consist of sales and marketing costs, recruiting, retention and training costs, management and administrative costs, and depreciation and amortization. Operating expenses decreased by $19.2 million or 29.5% from $64.9 million in 2000 to $45.7 million in 2001. The operating expense decrease was attributable to the restructuring actions taken in 2000, which is reflected in reduced office space and lower headcount. As a percentage of revenues, operating expenses decreased by 3.3 percentage points from 32.3% in 2000 to 29.0% in 2001, primarily as a result of the actions described above.
Income (loss) from operations. Income from operations increased by $6.1 million from a loss of $5.6 million in 2000 to income of $0.5 million in 2001. The shift from a loss from operations to income from operations was the result of reduced operating expenses partially offset by the lower revenue levels.
Other (income) expense, net. Other expense, net, consists of interest expense of $3.6 million on the Company’s revolving credit facility offset by $0.3 million interest income on the Company’s tax refund and a $0.4 million gain on the sale of stock that was distributed to ARC from its Health care provider, MetLife, as it transitioned from a mutual company to a public company. Other expense, net decreased by $0.5 million from an expense of $3.4 million in 2000 to an expense of $2.9 million in 2001. The decrease in other expense is primarily the result of a decrease in interest expense resulting from decreased debt levels and lower interest rates, offset by a gain of $1.1 million on the sale of an interest rate swap agreement that was recognized in the second quarter of 2000.
Earnings before interest, income taxes, depreciation and amortization. Earnings before interest, income taxes, depreciation and amortization (EBITDA) was $5.0 million year to date, which is comprised of loss before taxes of $(2.4) million plus depreciation and amortization of $4.1 million and net interest of $3.3 million. This compares to EBITDA of $0.0 million for the same nine-month period in 2000. The increase is primarily due to having income from operations as compared to a loss from operations in the prior period.
Liquidity and Capital Resources
ARC has historically financed its operations and capital expenditures through sales of equity securities, a bank line of credit and cash generated from operations. Net cash provided by operations was $16.6 million as compared to net cash provided by operations of $2.6 million during the first nine months of 2001 and 2000, respectively. Net cash provided by operations in 2001 was favorably impacted by the reduction in accounts receivable of $16.4 million and the receipt of income tax refunds of $5.2 million.
Current liabilities exceeded current assets by $12.0 million at September 30, 2001. Current liabilities include $30.6 million of outstanding borrowings against its line of credit which has a maturity date of January 1, 2002. During the first nine months of 2001, the Company used the cash provided by operations to reduce its debt by $13.4 million and for capital purchases of $1.6 million. In addition, the Company is currently in discussion with several financial institutions to obtain a new line of credit, which would extend the maturity date to 2004. There can be no guarantee that the refinancing will be completed or that the current loan agreement will be extended past January 1, 2002.
Assuming the successful negotiation of a new credit facility, or the continued extension of its current banking arrangement, the Company believes its cash balances, available line of credit and funds from operations will be sufficient to meet all of its anticipated cash requirements for at least the next 12 months.
Recently Issued Accounting Pronouncements
In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) which supersedes APB Opinion No. 17, “Intangible Assets”. SFAS 142 addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. SFAS 142 also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The provisions of SFAS 142 are required to be applied starting with fiscal years beginning after December 15, 2001. SFAS 142 is required to be applied at the beginning of an entity’s fiscal year and to be applied to all goodwill and other intangible assets recognized in its financial statements at that date. As of the date of adoption, the Company expects to have unamortized goodwill in the amount of approximately $2.7 million which will be subject to the transition provisions of SFAS 142. In 2001, amortization expense will be approximately $76,000. As such, management has deemed that the implementation of this change will not be material.
In July 2001, the FASB issued SFAS No. 141, “Business Combinations” ("SFAS 141") which supersedes APB Opinion No. 16, “Business Combinations”, and SFAS No. 38, “Accounting for Preacquisition Contingencies of Purchased Enterprises”. SFAS 141 addresses financial accounting and reporting for business combinations and requires that all business combinations within the scope of the SFAS 141 be accounted for using only the purchase method. SFAS 141 is required to be adopted for all business combinations initiated after June 30, 2001. Management has assessed the impact of the adoption of SFAS 141 on its consolidated financial statements and believes the impact will not be material.
In October 2001, the FASB issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS 144 supercedes SFAS No. 121, “Accounting for the Impairment of Long-Loved Assets and for Long-Lived Assets to Be Disposed Of” it retains many of the fundamental provisions of that Statement. SFAS 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occuring Events and Transactions” for the disposal of a segment of a business. However, it retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale. SFAS 144 is effective for the fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company is in the process of evaluating the impact that adoption of SFAS 144 may have on the financial statements, however, such impact, if any, is not known or reasonably estimable at this time.
FORWARD-LOOKING STATEMENTS
The Company makes forward-looking statements from time to time and desires to take advantage of the “safe harbor”, which is afforded such statements under the Private Securities Litigation Reform Act of 1995, when they are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the forward-looking statements. The statements contained in this Form 10-Q, including those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” statements contained in future filings with the Securities and Exchange Commission publicly disseminated press releases, and statements which may be made from time to time in the future by management of the company in presentations to shareholders, prospective investors, and others interested in the business and financial affairs of the Company, which are not historical facts, are forward-looking statements. Any projections of financial performance or statements concerning expectations as to future developments should not be construed in any manner as a guarantee that such results or developments will, in fact, occur. There can be no assurance any forward-looking statement will be realized or that actual results will not be significantly different from that set forth in such forward-looking statements.
In addition, to the risks and uncertainties of ordinary business operations, the forward-looking statements of the Company referred to above are also subject to the following risks and uncertainties:
• The Company’s ability to successfully refinance its debt;
• The Company’s ability to attract and retain qualified information technology professionals;
• The Company’s ability to recruit, train, integrate and retain qualified sales directors, account mangers, recruiters and client staffing managers;
• Competition in the information technology services marketplace;
• The Company’s continued ability to initiate and develop client relationships;
• The Company’s ability to identify and respond to trends in information technology;
• Unforeseen business trends in the Company’s national accounts or other large clients;
• Pricing pressures and/or wage inflation and the resulting impact on gross profit and net operating margins;
• The ability to successfully enter new geographic markets; and
• The effect of changes in general economic conditions.
Item 3. – Quantitative and Qualitative Disclosures About Market Risk
The market risk that the Company is exposed to primarily relates to changes in interest rates on its borrowings. At September 30, 2001 the Company had $30.6 million in floating-rate debt. An adverse change in interest rates during any period that the loan is outstanding would cause an increase in interest expense. A 100 basis point increase in the bank’s base rate would increase the annual amount of interest expense by approximately $0.3 million.
PART II – OTHER INFORMATION
Item 6. – Exhibits and Reports on Form 8-K
(b) The registrant was not required to file and did not voluntarily file any reports on Form 8-K for the quarter ended September 30, 2001.
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.
| | ALTERNATIVE RESOURCES CORPORATION |
| | |
Date: November 14, 2001 | | /s/ Steven Purcell |
| | Steven Purcell |
| | Senior Vice President, Chief Financial Officer, Treasurer and Secretary |
