SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999.
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 number 0-22-309
ASI SOLUTIONS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 13-3903237
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
780 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 319-8400
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
----- ----
The number of shares of the registrant's Common Stock, par value $0.01 per
share, outstanding on January 19, 2000 was 6,639,033.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASI Solutions Incorporated
Consolidated Balance Sheets
December 31, 1999 and March 31, 1999
December 31, March 31,
1999 1999
(Unaudited)
--------------------- ---------------------
ASSETS:
Current Assets:
Cash and cash equivalents $ 4,436,925 $ 7,595,366
Accounts receivable, net 14,280,615 12,874,967
Prepaid expenses and other current assets 722,451 576,424
Income taxes receivable 754,768
Deferred income taxes 299,478 299,478
--------------------- ---------------------
Total current assets 20,494,237 21,346,235
Property and equipment, net 5,099,038 5,218,408
Intangible assets, net 22,620,355 23,258,472
Deferred financing costs 332,015 391,386
Other assets 374,079 325,518
--------------------- ---------------------
Total assets $48,919,724 $50,540,019
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current portion, notes payable to bank $ 3,207,523 $ 7,143,658
Current portion, subordinated notes payable 1,666,667 1,666,666
Other debt 66,501
Accounts payable and accrued expenses 12,313,194 7,946,658
Accrued income taxes 326,964
--------------------- ---------------------
Total current liabilities 17,187,384 17,150,447
Deferred income taxes 543,593 543,593
Notes payable to bank, less current portion 8,817,478 11,224,900
Subordinated notes payable, less current portion 1,666,667
Other liabilities 336,452 268,373
--------------------- ---------------------
Total liabilities 26,884,907 30,853,980
Stockholders' Equity:
Common stock 66,541 65,432
Common stock-restricted 305
Additional paid in capital 11,169,437 11,038,250
Accumulated other comprehensive income 42,896 (7,839)
Retained earnings 10,885,004 8,982,927
Treasury stock, 14,999 shares, at cost (129,366) (392,731)
--------------------- ---------------------
Total stockholders' equity 22,034,817 19,686,039
--------------------- ---------------------
Total liabilities & stockholders' equity $48,919,724 $50,540,019
===================== =====================
The accompanying notes are an integral part of these financial statements.
1
ASI Solutions Incorporated
Unaudited Consolidated Statements of Income
For the Three and Nine Months Ended December 31, 1999 and 1998
Three Months Ended Nine Months Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
-------------------------------- -------------------------------
Revenue $20,252,038 $18,057,585 $51,390,674 $44,914,435
Cost of services 10,748,479 9,072,737 27,437,355 22,150,368
-------------------------------- -------------------------------
Gross profit 9,503,559 8,984,848 23,953,319 22,764,067
Operating expenses:
General and administrative 5,753,379 4,673,560 13,537,010 10,955,818
Sales and marketing 1,586,651 1,452,106 4,382,561 4,002,451
Research and development 489,765 487,190 1,550,670 1,403,696
-------------------------------- -------------------------------
Income from operations 1,673,764 2,371,992 4,483,078 6,402,102
Interest expense, net 371,476 423,635 1,152,744 1,378,506
-------------------------------- -------------------------------
Income before provision for income taxes 1,302,288 1,948,357 3,330,334 5,023,596
Provision for income taxes 582,995 827,709 1,428,257 2,134,684
-------------------------------- -------------------------------
Net income $ 719,293 $ 1,120,648 $ 1,902,077 $ 2,888,912
================================ ===============================
Basic earnings per share $0.11 $0.17 $0.29 $0.45
================================ ===============================
Diluted earnings per share $0.11 $0.17 $0.28 $0.44
================================ ===============================
Weighted average common shares outstanding:
Basic shares 6,639,033 6,497,631 6,572,220 6,483,724
Diluted effect of stock options and warrants 46,686 63,373 143,115 112,273
-------------------------------- -------------------------------
Diluted shares 6,685,719 6,561,004 6,715,334 6,595,997
================================ ===============================
The accompanying notes are an integral part of these financial statements.
2
ASI Solutions Incorporated
Unaudited Consolidated Statements of Cash Flows
For the Nine Months Ended December 31, 1999 and 1998
1999 1998
---------------------- ----------------------
Cash flow from operating activities:
Net income: $ 1,902,077 $ 2,888,912
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,954,103 1,855,574
Provision for doubtful accounts 65,216
(Gain) loss on fixed asset disposal (219) 512
Other 74,371
Changes in assets and liabilities:
Accounts receivable (802,968) (2,976,988)
Prepaid expenses and other current assets (135,610) 131,302
Other assets (26,678) (2,532)
Accounts payable and accrued expenses 3,538,369 4,921,607
Income taxes (880,100) 928,574
Other liabilities 52,709 (53,573)
---------------------- ----------------------
Net cash provided by operating activities 5,676,054 7,758,604
---------------------- ----------------------
Cash flow from investing activities:
Fixed asset additions (1,139,486) (861,417)
Other (50,576) (40,333)
---------------------- ----------------------
Net cash used in investing activities (1,190,062) (901,750)
---------------------- ----------------------
Cash flow from financing activities:
Repayment of debt (8,076,724) (6,273,331)
Restricted cash 1,891,821
Payment of financing costs (15,000)
Proceeds from issuance of common stock, net 227,964 196,832
Issuance of common stock-restricted from treasury 133,005
---------------------- ----------------------
Net cash used in financing activities (7,730,755) (4,184,678)
---------------------- ----------------------
Effect of exchange rate changes on cash and cash
equivalents 86,322 52,084
Net (decrease) increase in cash and cash equivalents (3,158,441) 2,724,260
Cash and cash equivalents at beginning of period 7,595,366 964,106
---------------------- ----------------------
Cash and cash equivalents at end of period $ 4,436,925 $ 3,688,366
====================== ======================
The accompanying notes are an integral part of these financial statements.
3
ASI Solutions Incorporated
Notes to Consolidated Financial Statements
(Unaudited)
1. Organization and Basis of Presentation:
--------------------------------------
On March 26, 1996, ASI Solutions Incorporated (the "Company") was incorporated
in the State of Delaware. Effective March 31, 1996, the Company issued
4,625,158 shares of Common Stock in exchange for substantially all of the issued
and outstanding shares of common stock of Proudfoot Reports Incorporated ("PRI")
and 95% of the common stock of Assessment Solutions Incorporated ("Assessment
Solutions"). During fiscal 1997, the remaining 5% of the outstanding common
stock of Assessment Solutions was redeemed. The initial stockholders of the
Company were also the principal stockholders of PRI and Assessment Solutions,
the two previously separate but commonly controlled companies. After the
reorganization, Assessment Solutions and PRI became wholly owned subsidiaries of
the Company. C3 Solutions Incorporated ("C3") was formed on September 16, 1996
as a wholly owned subsidiary of the Company. On August 29, 1997, the Company's
newly created subsidiary, T3 Solutions Incorporated ("T3"), acquired the assets
of Effective Learning Systems. On November 13, 1997, the Company's newly created
subsidiary ("McLagan Partners") acquired substantially all of the assets and
business operations of McLagan Partners Incorporated and related entities. The
Company, Assessment Solutions, PRI, C3, T3 and McLagan Partners are hereinafter
referred to collectively as the "Company."
The exchange described above has been accounted for as a reorganization since
all entities involved were under common control. The consolidated financial
statements reflect the interests attributable to the one controlling shareholder
of both combined entities at their historical basis of accounting. The
remaining interests have been accounted for as a purchase of minority interests
and the excess of the purchase price over the related historical cost of
$1,063,000 has been allocated to intangible assets. All intercompany accounts
and transactions have been eliminated in consolidation.
Effective April 16, 1997, the Company sold 1.8 million shares of Common Stock to
the public at a price of $6 per share in an initial public offering and pursuant
to an over-allotment option, the underwriter purchased 270,000 shares of Common
Stock at a price of $6 per share (the "Offering"). Proceeds from the Offering,
net of underwriters' discount and offering costs, were approximately $9,034,000.
Effective on the Offering date, the Company's Certificate of Incorporation (the
"Certificate") was restated to increase the number of authorized shares of
Common Stock to 18 million shares.
The accompanying unaudited interim financial statements of the Company have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). Certain information and note disclosures normally
included in annual financial statements have been condensed or omitted pursuant
to those rules and regulations. In the opinion of management, all adjustments,
consisting of normal, recurring adjustments considered necessary for a fair
presentation, have been included. Although management believes that the
disclosures made are adequate to ensure that the information presented is not
misleading, it is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1999.
The results of the nine months ended December 31, 1999 and 1998 are not
necessarily indicative of the results of operations for the entire year.
The financial statements of foreign operations, where the local currency is the
functional currency, are translated into U.S. dollars using exchange rates in
effect at period end for assets and liabilities and
1
average exchange rates during each reporting period for results of operations.
Adjustments resulting from translation of financial statements are reflected as
a separate component of stockholders' equity.
2. Operations:
----------
The Company
ASI Solutions Incorporated is a leading national provider of a comprehensive
range of human resources outsourcing services for large organizations seeking to
hire, train and develop a higher quality, more effective workforce. The
Company's services are organized into three core areas: performance improvement
services, employment process outsourcing and compensation services and market
share studies. The Company believes these services position the Company as a
single-source solution for many organizations that outsource all or a portion of
their human resources functions. The Company markets its services principally
to Fortune 500 companies for which customer service, sales and call center
functions are critical components of their businesses. Industries served by the
Company include telecommunications, financial services, information technology,
consumer products and healthcare.
Impact Of Recently Issued Accounting Pronouncements
In fiscal 1999 the Company adopted, Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), which requires that
changes in comprehensive income be shown in a financial statement that is
displayed with the same prominence as other financial statements. Such
information is included in the Statement of Stockholders' Equity.
In fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS 131"), which changes the way public companies report information about
segments. SFAS 131, which is based on the management approach to segment
reporting, includes requirements to report selected segment information
quarterly and entity-wide disclosures about products and services, major
customers, and the material countries in which the entity holds and reports
revenues.
2
3. Stockholders' Equity:
---------------------
A summary of the changes in Stockholders' Equity for the nine months ended
December 31, 1999 is as follows:
Additional Accumulated
Common Paid-In Other Retained Treasury
Shares Stock Capital Comprehensive Earnings Stock Total
Income
- ---------------------------------------------------------------------------------------------------------------------
Balance, March 31, 1999 6,497,631 $65,432 $11,038,250 $(7,839) $ 8,982,927 $(392,731) $19,686,039
Issuance of Common Stock
for Employee Stock
Purchase Plan 85,438 855 360,124 360,979
Issuance of Common Stock-
Restricted from Treasury 30,535 305 (263,670) 263,365
Exercise of Employee 34,987
Stock Options 25,429 254 34,733
Translation adjustment 50,735 50,735
Net Income 1,902,077 1,902,077
-------------------------------------------------------------------------------------------
Balance, December 31, 6,639,033 $66,846 $11,169,437 $42,896 $10,885,004 $(129,366) $22,034,817
1999
===========================================================================================
For the three month period ending December 31, 1999 and 1998, other
comprehensive income was $(24,948) and $14,319, respectively.
4. Acquisitions:
-------------
On November 13, 1997, the Company acquired substantially all of the assets
(primarily fixed assets of $483,978) and business operations of McLagan Partners
Incorporated and related entities (collectively, "McLagan"). The consideration
paid by the Company for the assets of McLagan included (i) $15.5 million paid in
cash; (ii) $5 million in subordinated notes bearing interest at 8 percent per
annum and payable in three equal principal installments on each of April 30,
1998, April 30, 1999 and April 30, 2000; and (iii) 50,000 shares of the
Company's common stock, par value $.01 per share, of ASI, and the Company
incurred $828,188 of costs associated with the acquisition.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets purchased
based upon the fair values at the date of the acquisition. As a result,
$22,294,210 of the purchase price has been allocated to goodwill, customer lists
and other intangibles which are being amortized on a straight line basis over
periods from 5 to 40 years. The Company has an incentive compensation program
with former officers of McLagan which provides for payments to such officers
when certain milestone earnings are attained. At the request of the officers,
$841,278 in connection with this incentive compensation program was paid to
employees in fiscal 1998.
On August 29, 1997, the Company acquired the assets of Effective Learning
Systems, a New Jersey based training organization, for approximately $1,000,000.
While the effect of this acquisition on the financial statements of the Company
was not significant, the Company did enter into promissory notes, which were
fully paid as of March 31, 1999.
3
5. Industry Segment Information:
-----------------------------
The Company's reportable segments are performance improvement services,
employment process outsourcing and compensation services and market share
studies.
Revenues and profits in the performance improvement services segment are
generated by designing custom solutions for a client where the Company assesses
job candidates, trains existing employees and measures employee performance
through monitoring customer contact. Fees charged are generally based on the
number of people and calls processed plus a fee for the development of a
customized solution.
Revenues and profits in the employee process outsourcing segment are generated
by providing the following services: advertising for and recruiting of
applicants; establishing automated telephonic voice response systems to screen
prospective applicants; arranging for the physical facilities and equipment
necessary for the pre-screening process and performing background checks on
applicants. For larger engagements, the Company generally charges a fixed
minimum monthly fee that may increase based on the total number of people
processed. For other assignments, such as background checks, revenue is based
on a fixed fee for each candidate processed.
Revenues and profits in the compensation services and market share studies
segment are generated by providing survey services to the financial and
securities industries. These include compensation as well as market share
survey services for retail operations within the financial services industry.
Only participating clients may purchase surveys. The Company also provides
compensation services where revenue is generated based on a fee per assignment
basis.
The accounting polices of the segments are the same as those described in the
"Summary of Significant Accounting Policies". The Company evaluates the
performance of its segments and allocates resources to them based on their
operating contribution, which represents segment revenues less direct costs of
operation, excluding the allocation of corporate expenses. Identifiable assets
of the operating segments principally consist of net accounts receivable
associated with the segment activities. Accounts receivable from performance
improvement services and employment process outsourcing are managed on a
combined basis. All other identifiable assets not attributable to industry
segments are included in corporate assets. The Company does not track
expenditures for long lived assets on a segment basis.
The table below presents information on the revenues and operating contribution
for each segment for the nine months ended December 31, 1999 and 1998, and items
which reconcile segment operating contribution to the Company's reported pre-tax
income.
4
Nine Months Ended December 31,
1999 1998
(in thousands)
Revenue:
Performance Improvement Services $13,738 $11,892
Employment Process Outsourcing 18,160 16,105
Compensation Services and Market Share Studies 19,493 16,917
------------- ------------
$51,391 $44,914
------------- ------------
Operating Contribution:
Performance Improvement Services $ 4,673 $ 4,454
Employment Process Outsourcing 5,537 6,311
Compensation Services and Market Share Studies 3,773 4,066
------------- ------------
$13,983 $14,831
------------- ------------
Consolidated Expenses (Income):
Interest, net 1,153 1,379
Depreciation and Amortization 1,951 1,855
Selling, General and Administrative and
Research and Development 7,549 6,573
------------- ------------
$10,653 $ 9,807
------------- ------------
Income before income taxes $ 3,330 $ 5,024
============= ============
Identifiable Assets:
Performance Improvement and Employment Process
Outsourcing $10,648 $13,429
Compensation Services and Market Share Studies 9,105 6,093
Corporate 6,214 3,795
------------- ------------
$25,967 $23,317
============= ============
5
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Quarterly Comparison of Results of Operations
The Company's revenue in the third quarter of fiscal 2000 increased 12.2% to
$20.3 million from $18.1 million in the third quarter of fiscal 1999. Net
income was $719 thousand, or $.11 per share, compared to $1.1 million, or $.17
per share, in the third quarter of fiscal 1999.
Performance Improvement Services revenue was $4.5 million, an increase of $.6
million, or 15.2%, from the third quarter of fiscal 1999 revenue of $3.9
million. Growth in Training and Performance Measurement revenue more than
offset a decline in Assessment and Selection revenue.
Employment Process Outsourcing revenue was $5.8 million, an increase of $.4
million, or 7.8%, from the third quarter of fiscal 1999 revenue of $5.4 million.
Background investigation revenue, which has a lower margin profile than
employment outsourcing, accounted for the increase.
Compensation Services and Market Share Studies revenue, which is comprised of
survey and consulting, was $9.9 million, an increase of $1.2 million, or 13.5 %
from the third quarter of fiscal 1999 revenue of $8.7 million. Revenue
increased across all service categories.
Cost of Services was $10.7 million, an increase of $1.6 million, or 18.5% from
the third quarter of fiscal 1999's amount of $9.1 million. As a percentage of
revenue, cost of services increased to 53.1% from 50.2% in last year's third
fiscal quarter. The increase is due primarily to higher personnel and related
expenses due to a shift to more labor intensive services within the Performance
Improvement Services and Employment Process Outsourcing areas, and to
contractually mandated incentive compensation expenses related to the
performance of the Compensation Services and Market Share Studies business area.
General and administrative expense was $5.8 million, an increase of $1.1
million, or 23.1%, from the third quarter of fiscal 1999's amount of $4.7
million. As a percentage of revenue, general and administrative expense was
28.4% compared to 25.9% in the third quarter of fiscal 1999. The increase is
due to contractually mandated incentive compensation expenses related to the
performance of the Compensation Services and Market Share Studies business area
and to higher personnel expenses as well as higher professional fees related to
information systems development.
Sales and marketing expense was $1.6 million, an increase of $.1 million or
9.3%, from the third quarter of fiscal 1999 amount of $1.5 million. As a
percentage of revenue, sales and marketing expense was 7.8% compared to 8% in
last year's third fiscal quarter. The increase is due to higher personnel and
communication expenses.
Research and development expense was $.5 in both the third quarters of fiscal
2000 and 1999. As a percentage of revenue, research and development expense was
2.4% in the third fiscal quarter of 1999 and 2.7% in last year's third quarter.
Net interest expense was $.4 million in both the third quarters of fiscal 2000
and 1999. The average balance of debt outstanding has decreased while interest
rates have increased.
As a percentage of pre-tax income, the provision for income taxes was 44.8%
compared to 42.5% in the third quarter of fiscal 1999.
As a percentage of revenue, net income was 3.6% compared to 6.2% in the third
quarter of fiscal 1999.
(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
6
Year to Date Comparison of Results of Operations
The Company's revenue in the first nine months of fiscal 2000 increased 14.4% to
$51.4 million from $44.9 million in the first nine months of fiscal 1999. Net
income was $1.9 million, or $.29 per share compared to $2.9 million, or $.45 per
share in the first nine months of fiscal 1999.
Performance Improvement Services revenue was $13.7 million, an increase of $1.8
million, or 15.5%, from the first nine months of fiscal 1999 revenue of $11.9
million. Both Training and Performance Measurement revenues increased by over
40% while Assessment and Selection revenue was essentially flat compared to the
prior year amount.
Employment Process Outsourcing revenue was $18.2 million, an increase of $2.1
million, or 12.8%, from the first nine months of fiscal 1999 revenue of $16.1
million. Both background investigation and outsourcing revenue increased from
prior year levels.
Compensation Services and Market Share Studies revenue was $19.5 million, an
increase of $2.6 million, or 15.2%, from the first nine months of fiscal 1999
revenue of $16.9 million.
Cost of Services was $27.4 million, an increase of $5.2 million, or 23.9 %, from
$22.2 million for the first nine months of fiscal 1999. As a percentage of
revenue, cost of services was 53.4% for the first nine months of fiscal 2000
compared to 49.3% in the first nine months of fiscal 1999. Higher personnel
expense, incentive compensation expenses, facility-related expenses and service
delivery expenses all contributed to the increase. These expense increases
largely resulted from a shift to more cost intensive service programs in
Performance Improvement Services and Employment Process Outsourcing.
General and administrative expense was $13.5 million, an increase of $2.5
million, or 23.6%, from $11 million in the first nine months of fiscal 1999. As
a percentage of revenue, general and administrative expense was 26.3% for the
first nine months of fiscal 2000 compared to 24.4% in the same period of fiscal
1999. Higher personnel expenses, contractually mandated incentive compensation
expenses related to the performance of the Compensation Services and Market
Share Studies business area, and information systems development expenses
account for most of the increase.
Sales and marketing expense was $4.4 million compared to $4 million for the
first nine months of fiscal 1999. As a percentage of revenue, sales and
marketing expense were 8.5% compared to 8.9% in the first nine months of fiscal
1999.
Research and development expense was $1.6 million, an increase of $.2 million,
or 10.5%, from $1.4 million in the first nine months of fiscal 1999. As a
percentage of revenue, research and development expense was 3% compared to 3.1%
in last year's first nine months.
Net interest expense was $1.2 million compared to $1.4 million in last year's
first nine months. The average balance of debt outstanding has decreased while
interest rates have increased.
As a percentage of pre-tax income, the provision for income taxes was 42.9%
compared to 42.5% in the first nine months of fiscal 1999.
As a percentage of revenue, net income was 3.7% compared to 6.4% in the first
nine months of fiscal 1999.
(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
7
Liquidity and Capital Resources
The Company's liquidity needs arise from capital requirements, capital
expenditures and principal and interest payments on debt. Historically, the
Company's source of liquidity has been cash flow generated internally from
operations, supplemented by short-term borrowings under bank lines of credit and
long-term equipment financing.
Cash flow provided by operating activities in the first nine months of fiscal
2000 was $5,676,054, on net income of $1,902,077, due to reductions in accounts
receivable and an increase in accounts payable and accrued expenses. Cash flow
used in investing activities of $1,190,062 in the first nine months of fiscal
2000 was primarily for fixed asset additions. Cash flow used in financing
activities was $7,730,755 in the first nine months of fiscal 2000 and was
primarily attributable to the repayment of outstanding debt.
In November 1997, the Company entered into a new bank credit agreement (the
"Credit Facility") which provides a $15 million term loan and a $5 million
revolving credit facility. The revolving credit facility was subsequently
increased to $10.0 million in December 1998. The term loan agreement expires
November 13, 2002, while the revolving credit facility expires November 13,
2000. At December 31, 1999, borrowings under the term loan were $11,500,000 and
there were no borrowings under the revolving credit facility. The Company also
had borrowings at December 31, 1999 under an equipment lease facility of
$525,000. The Credit Facility contains various financial and other covenants
and conditions, including, but not limited to, limiting capital expenditures and
paying dividends, making acquisitions and incurring additional indebtedness.
The Company received a waiver for non-compliance of certain loan covenants as of
December 31, 1999.
Management believes the Company's working capital, credit facility and cash
flows from operations will be sufficient to meet expected future working capital
requirements.
Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risk, e.g. the risk of loss arising from
adverse changes in interest rates and foreign currency exchange rates.
Year 2000 Compliance
The Company has conducted a review of its information systems to identify those
areas which could be affected by the "Year 2000" issue. Key financial,
informational and operational systems have been inventoried and assessed, and
detailed plans were developed and implemented for the required systems
modifications or replacements. Due to significant expansion experienced by the
Company during the last three years, the Company has created new software or
modified existing software to continue providing superior customer service.
Through that process, the systems used by the Company have become Year 2000
compliant. Also, as part of the expansion, the Company has upgraded the
information systems' infrastructure, via the procurement of new hardware and
software that are certified by their manufacturers as year 2000 compliant.
8
In addition, third party customers and suppliers have provided written
assurances for the Company that they are Year 2000 compliant. The Company has
received assurance from the vast majority of these third parties that they will
be compliant. Management believes that third party non-compliance will not
materially impact the Company's operations.
Note on Forward-Looking Statements
Certain statements in this Form 10-Q and written and oral statements made by the
Company may contain, in addition to historical information, forward-looking
statements within the meaning of section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
The words "believe", "expect", "intend", "estimate" and "anticipate" and other
expressions which are predictions of or indicate future events and trends and
which do not relate to historical matters identify forward-looking statements.
In addition, the Company's discussion above regarding Year 2000 compliance
contains several forward-looking statements, including without limitation, the
Company's expectations as to when the phase out of non-compliant software and
hardware will be completed, its estimates of the costs involved in achieving
year 2000 readiness and its belief that third-party non-compliance would not
materially impact the Company's operations. Any such statements are subject to
risks and uncertainties that could cause the actual results to differ materially
from those projected in such statements, including negative developments
relating to unforeseen project cancellations or the effect of a customer
delaying a project, negative developments relating to the Company's significant
customers, a reduction in the demand for the Company's services which could
impact capacity utilization as well as sales volume, the impact of intense
competition, changes in the industry, changes in the general economy such as
inflationary pressure, the availability of Year 2000 compliant replacement
software and hardware as well as qualified personnel and other information
technology resources and the actions of third parties and governmental agencies
with respect to Year 2000 issues. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.
9
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed as part of this report:
Exhibit Number Description
-------------- -----------
27.1 Financial Data Schedule.
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.
ASI SOLUTIONS INCORPORATED
Date: January 28, 2000 By: /s/ MICHAEL J. MELE
--------------------
Michael J. Mele
Senior Vice President and Chief Financial Officer
(on behalf of the registrant and as principal
financial and accounting officer)
10