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UNITED STATES
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 October 1, 2000.
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
Commission file number 0-7907
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)
(Former name, former address and former fiscal year, if changed since last
report)
Former address:
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 - October 20, 2000.
Common stock, $.05 par value 2,827,153
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(Class) (Outstanding shares)
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ABLEST INC. AND SUBSIDIARIES
Index
Part I
Financial Information
Condensed Consolidated Balance Sheets - October 1, 2000 -
(Unaudited) and December 26, 1999 3
Condensed Consolidated Statements of Operations -
(Unaudited) Thirteen and
forty week periods ended October 1, 2000
and thirteen and thirty-nine week periods ended
September 26, 1999 4
Condensed Consolidated Statements of Cash Flows - (Unaudited)
Forty week period ended October 1, 2000 and thirty-nine week
period ended September 26, 1999 5
Notes to Condensed Consolidated Financial Statements 6 - 8
Independent Auditors' Review Report 9
Management's Discussion and Analysis of Results of Operations
and Financial Condition 10-11
Part II
Other Information 12
Signatures 13
* * * * *
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Part I-Financial Information
ABLEST INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except share data)
October 1, December 26,
2000 1999
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(Unaudited)
Assets
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Current assets:
Cash and cash equivalents $ 1,260 562
Receivables 13,933 13,492
Prepaid expenses and other 355 419
Deferred income taxes 1,957 1,100
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Total current assets 17,505 15,573
Net property, plant and equipment 1,907 2,213
Deferred income taxes 1,047 909
Intangible assets, net 4,673 4,880
Net assets of discontinued operations (note 5) 314 20,434
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$ 25,446 44,009
======== =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 652 1,468
Accrued expenses 5,182 7,223
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Total current liabilities 5,834 8,691
Long-term debt, excluding current installments -- 15,950
Other liabilities 452 756
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Total liabilities 6,286 25,397
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Stockholders' equity (note 3):
Preferred Stock of $.05 par value. Authorized
500,000 shares, none issued -- --
Common stock of $.05 par value. Authorized
7,500,000 shares; issued 3,178,082 and 3,167,092
shares for 2000 and 1999, respectively 159 158
Additional paid-in capital 4,362 4,285
Retained earnings 16,217 15,391
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20,738 19,834
Less cost of common stock in treasury: 350,529 and
285,529 shares for 2000 and 1999, respectively (1,578) (1,222)
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Total stockholders' equity 19,160 18,612
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$ 25,446 44,009
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See accompanying notes to condensed consolidated financial statements.
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ABLEST INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share data)
Thirteen Thirteen Forty Thirty-nine
week period Week period week period week period
Ended Ended Ended Ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
----------- ---------- ---------- ----------
Net service revenues $ 26,139 25, 432 76,938 70,376
Cost of services 20,326 19,573 59,696 54,312
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Gross profit 5,813 5,859 17,242 16,064
Selling, general and administrative expenses 4,958 4,972 15,823 14,348
Amortization of intangible assets 92 181 275 543
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Operating income 763 706 1,144 1,173
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Other income (expense):
Interest expense, net (6) (148) (133) (438)
Miscellaneous, net (6) 163 123 161
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Total other income (expense), net (12) 15 (10) (277)
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Income before income taxes from
continuing operations 751 721 1,134 896
Income tax expense 326 356 493 431
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Net earnings from
Continuing operations 425 365 641 465
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Discontinued operations (note 5):
Loss from discontinued operations,
net of income taxes -- (143) -- (469)
Adjustment of loss on sale of discontinued
operations, net of income taxes (15) -- 185 --
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(15) (143) 185 (469)
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Net earnings (loss) $ 410 222 826 (4)
=========== ========== ========== ==========
Basic and diluted net earnings (loss) per share:
Continuing operations $ .15 .13 .22 .17
Loss from discontinued operations -- (.05) -- (.17)
Adjustment to loss on sale of discontinued
operations -- -- .07 --
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$ .15 .08 .29 (.00)
=========== ========== ========== ==========
Weighted average number of common shares
outstanding 2,832,961 2,881,133 2,867,997 2,880,717
=========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
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ABLEST INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Forty week Thirty-nine week
period ended period ended
October 1, 2000 September 26, 1999
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Cash flows from operating activities:
Net earnings from continuing operations $ 641 465
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation 888 497
Amortization of intangible assets 274 543
Gain on disposal of property, plant
and equipment, net (98) --
Deferred income taxes (117) --
Changes in assets and liabilities (see below) (1,322) (764)
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Net cash provided (used) by operating activities
of continuing operations 266 741
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Cash flows from investing activities:
Additions to property, plant and equipment (1,223) (724)
Proceeds from disposal of property, plant and equipment 366 --
Acquisitions and earnout payments, net of cash acquired (225) (1,310)
Cash transfer from discontinued operations (Note 5) 8,683 --
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Net cash (used)/provided by investing activities of
Continuing operations 7,601 (2,034)
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 4,800 10,800
Repayment of bank line of credit borrowings (14,100) (10,350)
Proceeds from exercise of stock options 78 --
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Net cash provided (used) by financing activities
of continuing operations (9,222) 450
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Net increase (decrease) in cash from continuing operations (1,355) (843)
Net increase in cash from discontinued operations (note 5) 10,736 193
Less amount transferred to continuing operations (8,683) --
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Net increase (decrease) in cash 698 (650)
Cash and cash equivalents at beginning of period 562 1,322
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Cash and cash equivalents at end of period $ 1,260 672
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Changes in assets and liabilities providing (using) cash:
Receivables $ (664) (2,483)
Prepaid expenses and other (75) (254)
Accounts payable (963) 449
Accrued expenses 570 1,333
Other liabilities (190) 191
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Total $ (1,322) (764)
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ABLEST INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. In the opinion of management of Ablest Inc. and Subsidiaries (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 October 1, 2000
and the consolidated statements of operations for the thirteen and
forty week periods ended October 1, 2000 and the thirteen and
thirty-nine week periods ended September 26, 1999 and the statement of
cash flows for the forty week period ended October 1, 2000 and the
thirty-nine week period ended September 26, 1999.
2. The results of operations for the thirteen and forty week periods
ended October 1, 2000 are not necessarily indicative of the results to
be expected for the full year.
3. The changes in stockholders' equity for the forty week period ended
October 1, 2000 are summarized as follows (in thousands, except
shares):
Additional Total
Common paid-in Retained Treasury Stock Stockholders'
stock capital earnings Shares Amount Equity
------- ---------- -------- -------- ------- -------------
Balance at December 26, 1999 $ 158 $ 4,285 $ 15,391 285,529 $(1,222) $18,612
Net earnings -- -- 826 -- -- 826
Exercised stock options 1 77 -- -- -- 78
Common stock acquired
and retired 65,000 (356) (356)
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Balance at October 1, 2000 $ 159 $ 4,362 $ 16,217 350,529 $(1,578) $19,160
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At the May 16, 2000 regularly scheduled Board of Directors meeting,
the board authorized the Company to repurchase up to $2.0 million of
its shares of common stock in the open market or privately over a
period of one year. During the current fiscal quarter, the Company
repurchased 21,600 shares of its common stock, in the open market, at
an average cost of $5.06 per share. To date, the Company has
repurchased a total of 65,000 shares at an average cost of $5.47 per
share.
4. For the forty week period ended October 1, 2000, 89,429 additional
stock options were granted and 47,606 stock options expired. As of
October 1, 2000 and December 26, 1999, the Company had exercisable
options outstanding to employees to purchase 125,258 and 166,088
common shares, respectively at prices ranging from $6.94 to $10.13 per
share.
During the second fiscal quarter, options to purchase 6,000 shares of
the Company's common stock were issued to each of the four independent
directors of the Company under the Independent Directors' Stock Option
Plan, (the "Plan"). The Plan provides for the initial issuance of
options to purchase 6,000 shares of the Company's common stock to each
independent director elected at the May 16, 2000 shareholder meeting.
Independent directors who are subsequently elected by the directors or
the shareholders for an initial term will receive options to purchase
6,000 shares immediately upon appointment. Each independent director
will also receive additional options to purchase 1,500 shares of
common stock each time he or she is re-elected to the Board of
Directors.
The maximum number of shares of common stock for which options may be
issued under the Plan is 100,000. As of October 1, 2000, options for
24,000 shares of common stock have been issued. All options are
non-qualified and are exercisable at 100% of the fair market price on
the date of grant. Options for the 6,000 shares of the Company's
common stock under each initial grant will become exercisable in three
equal, annual installments on the first, second and third
anniversaries of the grant thereof. All other stock options granted
under the Plan will become exercisable on the first anniversary of the
grant thereof. The term of each option grant is ten years from the
date of grant.
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ABLEST INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(Unaudited)
5. On March 13, 2000, the Company sold substantially all of its
industrial maintenance operations 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 uncollectable accounts
receivable acquired by Onyx and the payment of certain severance
costs. The Company recorded an estimated net loss from the sale of its
industrial maintenance operations of $7,086,000, in the fourth quarter
of 1999. 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.
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. During the current fiscal
quarter an adjustment was made for $15,000 (net of taxes) to reconcile
amounts previously recorded against continuing operations but which
pertained to the discontinued operation. At October 1, 2000, the
remaining accrued loss on disposal is approximately $649,000 and
represents management's current best estimate of remaining costs
associated with the transaction.
The net assets of discontinued operations at October 1, 2000,
represent residual assets (such as certain remaining property held for
sale and deferred tax assets expected to reverse upon filing the 2000
tax return) and liabilities (primarily consisting of the remaining
accrual for the loss on disposal).
The proceeds received from the sale were used to discharge bank debt
allocated to the discontinued operations and pay various transaction
costs. The remaining cash of $8,683,000 was transferred to continuing
operations and primarily used to repay debt allocated to staffing
services.
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ABLEST INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements, continued
(Unaudited)
6. Effective with the March 12, 2000 sale of its industrial maintenance
operations, the Company's sole business is in providing staffing
services on a temporary and contract basis. 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. Operating segment data (net of
intra-segment activity) is as follows (in thousands):
Thirteen Thirteen Forty Thirty-nine
Week period Week period Week period Week period
Ended Ended Ended Ended
October 1, September 26, October 1, September 26,
2000 1999 2000 1999
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Commercial Staffing Services:
Net revenues $22,490 20,298 65,270 53,414
Cost of services 17,623 15,778 51,101 41,542
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Gross profit dollars 4,867 4,520 14,169 11,872
Selling, general & administrative 3,179 2,723 9,314 7,791
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Operating income 1,688 1,797 4,855 4,081
Amortization -- -- -- --
Receivables $12,021 9,601 12,021 9,601
Technology Staffing Services:
Net revenues $ 3,649 5,135 11,668 16,962
Cost of services 2,703 3,816 8,700 12,814
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Gross profit dollars 946 1,319 2,968 4,148
Selling, general & administrative 590 930 2,031 2,822
------- ------ ------ ------
Operating income 356 389 937 1,326
Amortization 30 60 274 543
Receivables $ 2,217 3,173 2,217 3,173
Operating income on this Segment Statement differs from the operating income
reported on the Condensed Consolidated Statement of Operations because it does
not include some corporate and amortization 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 to the operating segments.
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Independent Auditors' Review Report
The Board of Directors and Stockholders
Ablest Inc.:
We have reviewed the condensed consolidated balance sheet of Ablest Inc. and
subsidiaries as of October 1, 2000 and the related condensed consolidated
statements of operations for the thirteen and forty week periods ended October
1, 2000 and the thirteen and thirty-nine week periods ended September 26, 1999
and the statement of cash flows for the forty week period ended October 1, 2000
and the thirty-nine week period ended September 26, 1999. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Ablest Inc. and subsidiaries as of
December 26, 1999 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year then ended (not presented
herein); and in our report dated February 18, 2000, except as to notes 2 and 14
which are as of March 13, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 26, 1999
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Tampa, Florida KPMG LLP
October 30, 2000
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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.
For financial reporting purposes, the Company's industrial maintenance
business, which was sold to Onyx Industrial Services, Inc. on March 12, 2000,
has been classified as a discontinued operation. The following discussion and
analysis of operations and financial condition pertains to the Company's
staffing services business, 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 year to date period ended October 1, 2000 was comprised of forty weeks
compared to thirty-nine weeks for the prior year to date period ended September
26, 1999. Both the current third quarter and prior year third quarter were
comprised of thirteen weeks.
Service revenues increased by $707,000 or 2.8% to $26.1 million from $25.4
million and by $6.6 million or 9.4% to $76.9 million from $70.3 million for the
quarter and year to date periods ended October 1, 2000, respectively, compared
to the same periods one year earlier.
Service revenue in the commercial staffing segment increased by $2.2 million or
10.8% to $22.5 million from $20.3 million for the current quarter and by $11.9
million or 22.2 % to $65.3 million from $54.4 million for the year to date
periods, compared to the same periods in the prior year. Contributing to this
improvement is an increase in service revenues of approximately $1.9 million
for the current quarter and $5.4 million for the year to date periods, being
generated from eight branches opened during the prior year. Five new branches
were opened during the current year and contributed $1.2 million and $1.8
million in service revenues to the current quarter and year to date periods,
respectively. All branches opened in the prior year, except one that broke
even, were profitable for the current quarter. Of the five branches opened in
the current year, three were profitable for the current quarter. Service
revenues generated from existing offices and from the extra week which was
included in the first quarter also contributed to the increase in service
revenues for the current year to date period.
Service revenues in the information technology segment decreased by $1.5
million or 28.9% to $3.6 million from $5.1 million and by $5.3 million or 31.2%
to $11.7 million from $17.0 million for the current quarter and year to date
periods, respectively. This decline reflects the continued post Y2K
industry-wide slowdown in information technology spending as well as the
national trend in a shift toward e-business and web-based technologies. Ablest
Technology Services is in the process of shifting from its original focus of
primarily servicing low-end solutions work, toward e-business applications
where trained professionals are scarce but margins are higher. In addition to
the above, new management has been brought in at the divisional level.
Gross profit dollars remained relatively unchanged at $5.8 million for the
current quarter compared to one year earlier. Gross profit dollars for the year
to date period increased by approximately $1.2 million or 7.3% to $17.2 million
from $16.0 million, compared to one year earlier. Gross profit margin declined
to 22.2% from 23.0% and to 22.4% from 22.8% for the quarter and year to date
periods, respectively. The year to date increase in gross profit dollars was
primarily the result of the revenue growth in the commercial staffing segment.
During the current fiscal quarter, the growth in the commercial staffing
segment was offset by the decline in the information technology segment. The
decline in gross profit margin is mainly the result of an increase in
Vendor-on-Premises programs (Point Source) that generate lower margins on
higher volumes. These programs may require the use of tiered staffing
suppliers, on a direct passthrough basis, to supplement the existing workforce.
While they do not negatively impact profitability, they do affect margin
calculations. Additional billings for these services were approximately
$407,000 for the current quarter and $1.1 million for the year to date period.
These billings impacted gross profit margins by approximately .4% and .3% for
the respective periods.
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Results of Operations (cont.):
Selling, general and administrative expenses, inclusive of amortization
expense, declined by approximately $100,000 or .8% to $5.1 million from $5.2
million for the quarter while still showing an increase of $1.2 million or 8.1%
to $16.1 million from $14.9 million for the year to date period, compared to
the same periods one year earlier. Contributing to the decline in selling,
general and administrative expenses for the current quarter is a leveling-off
of corporate expenses as we settle in to our new corporate facility in the
Tampa Bay area. Contributing to the year to date increase were transitional
expenses associated with the closing of our former administrative office in
Buffalo, New York during the fiscal first and second quarters of the current
year. Also impacting the decrease in the current quarter and partially
offsetting the increase in the year to date selling, general and administrative
expenses is a reduction of $89,000 and $268,000 in amortization expense for the
same respective periods.
Other expenses, net, remained relatively unchanged for the current quarter when
compared to the same period one year earlier. For the current year to date
period, other expenses, net, decreased by approximately $267,000, due to a
reduction in interest expense of approximately $300,000, over the prior year.
The effective tax rate is 43.4% and 43.5% for the current quarter and year to
date periods, respectively. The effective tax rates are the result of the
multiple taxing jurisdictions in which the Company operates.
Financial Condition:
The following information is provided for the continuing staffing operations as
of October 1, 2000.
The quick ratio was 2.7 to 1 compared to 1.6 to 1 at December 27, 1999 and the
current ratio was 3.0 to 1 compared to 1.8 to 1 for the same respective period.
Net working capital increased by $4.8 million during the current fiscal year.
Contributing to this improvement was an increase of approximately $698,000 in
cash, $441,000 in accounts receivable and $857,000 in deferred income taxes.
Additionally, accounts payable and accrued expenses decreased by $816,000 and
$2.0 million, respectively. The increase in cash and deferred income taxes as
well as the reduction in accounts payable are attributable to the use of
proceeds and recording of the sale of the Company's industrial maintenance
business in March of this year. The increase in accounts receivable is
associated with the growth in service revenue in the Company's commercial
staffing segment. The decrease in accrued expenses is primarily the result of
the payment of the Company's prior year retrospective insurance adjustment and
the payment of accrued incentive compensation, also from the prior fiscal year.
Reference should be made to the Consolidated Statement of Cash Flows, which
details the sources and uses of cash.
Open credit commitments at October 1, 2000 were $20.0 million. A portion of the
proceeds from the sale of the industrial maintenance business was used to pay
off the Company's outstanding debt in its entirety in March 2000.
Capital expenditures for the current fiscal quarter were approximately
$167,000. Of this amount $118,000 was for computer hardware, software and
office automation, $18,000 was for leasehold improvements and the balance was
for furniture and fixtures. It is anticipated that existing funds and cash
flows from operations will be sufficient to cover working capital and capital
expenditures for 2000.
Discontinued Operations:
During the current fiscal quarter, a minor adjustment was made to the
previously recorded loss on sale of discontinued operations to reconcile
amounts previously recorded against continuing operations but which pertained
to the discontinued operations. Expenditures associated with the winding down
of the discontinued operations were adjusted against the various reserves
established at the measurement date of September 26, 1999. At that time,
reserves were established for an anticipated loss on the sale of discontinued
operations, holding period losses, severance payments and transactional
expenses. Management believes that balances remaining in the respective
reserves will be sufficient to cover future anticipated expenses associated
with the discontinued operations.
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Part II-Other Information
Item 6 Exhibits and Reports on Form 8-K
(A) Exhibit 27.1 Financial Data Schedules
(B) Reports on Form 8-K:
There were no reports on Form 8-K filed during the current
fiscal quarter.
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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: October 31, 2000 /s/ Mark P. Kashmanian
---------------------------------
Mark P. Kashmanian
Chief Accounting Officer
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