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 June 30, 2002
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934.
Commission file number: 0-7907
Ablest Inc.
-----------
(Exact name of registrant as specified in its charter)
Delaware 65-0978462
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1901 Ulmerton Road, Suite 300 33762
Clearwater, Florida -----
(Address of principal executive offices) (Zip Code)
727-299-1200
(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 - July 19, 2002
Common stock, $.05 par value 2,890,210
---------------------------- ---------
(Class) (Outstanding shares)
'
ABLEST INC.
Index
Part I
Financial Information
Condensed Balance Sheets - June 30, 2002 - (Unaudited) and December 30, 2001 3
Condensed Statements of Operations - (Unaudited) Thirteen week periods ended 4
June 30, 2002 and July 1, 2001
Condensed Statements of Cash Flows - (Unaudited) Thirteen week periods ended 5
June 30, 2002 and July 1, 2001
Notes to Condensed Financial Statements 6 - 9
Management's Discussion and Analysis of the Results of Operations and
Financial Condition 9 - 11
Part II
Other Information 12
Signatures 13
Exhibits 14 - 15
* * * * *
2
Part I-Financial Information
ABLEST INC.
Condensed Balance Sheets
(In thousands, except share data)
June 30, December 30,
Assets 2002 2001
------ -------------- --------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 355 607
Receivables, net 13,727 10,232
Prepaid expenses 400 237
Deferred income taxes 1,663 1,737
--------- -------
Total current assets 16,145 12,813
Property, plant and equipment, net 1,063 1,385
Deferred income taxes 2,037 1,962
Goodwill 1,283 1,283
Other assets 52 52
--------- -------
$ 20,580 17,495
========= =======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 399 326
Accrued expenses 4,402 2,898
Line of credit borrowings 1,450 -
--------- -------
Total current liabilities 6,251 3,224
Other liabilities 8 8
--------- -------
Total liabilities 6,259 3,232
--------- -------
Stockholders' equity (note 3):
Preferred Stock of $.05 par value. Authorized
500,000 shares, none issued. - -
Common stock of $.05 par value. Authorized
7,500,000 shares; issued 3,293,395 shares for both
2002 and 2001, outstanding 2,890,210 and 2,906,156
shares for 2002 and 2001, respectively 165 165
Additional paid-in capital 4,936 4,936
Retained earnings 11,126 11,048
Less notes receivable from stock sale (22) (22)
Less unearned restricted stock (57) (108)
--------- -------
16,148 16,019
Less cost of common stock in treasury: 403,185 and
387,239 shares for 2002 and 2001, respectively (1,827) (1,756)
--------- -------
Total stockholders' equity 14,321 14,263
--------- -------
$ 20,580 17,495
========= =======
See accompanying notes to condensed financial statements.
3
ABLEST INC.
Condensed Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
Thirteen Thirteen Twenty-six Twenty-six
week period week period week period week period
ended ended ended ended
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net service revenues $ 26,234 21,021 45,461 42,867
Cost of services 21,411 16,641 37,027 33,953
---------- ----------- ---------- ----------
Gross profit 4,823 4,380 8,434 8,914
Selling, general and administrative expenses 4,404 4,839 8,597 10,055
Amortization of goodwill and intangible assets - 92 - 183
---------- ----------- ---------- ----------
Operating income (loss) 419 (551) (163) (1,324)
---------- ----------- ---------- ----------
Other (expense) income:
Interest (expense) income, net (6) 13 44 20
Other (8) - (4) 8
---------- ----------- ---------- ----------
Total other (expense) income, net (14) 13 40 28
---------- ----------- ---------- ----------
Income (loss) before income taxes 405 (538) (123) ( 1,296)
Income tax benefit - (203) (201) (460)
---------- ----------- ---------- ----------
Net earnings (loss) $ 405 (335) 78 (836)
========== =========== ========== ==========
Basic and diluted net earnings (loss) per share: $ .14 (.12) .03 (.29)
========== =========== ========== ==========
Basic weighted average number of common shares outstanding 2,873,007 2,885,350 2,896,944 2,882,246
========== =========== ========== ==========
Diluted weighted average number of common shares outstanding 2,893,007 2,925,350 2,916,944 2,922,246
========== =========== ========== ==========
See accompanying notes to condensed financial statements.
4
ABLEST INC.
Condensed Statements of Cash Flows
(Unaudited, in thousands)
Twenty-six week Twenty-six week
period ended period ended
June 30, 2002 July 1, 2001
-------------- --------------
Cash flows from operating activities:
Net earnings (loss) from operations $ 78 (836)
Adjustments to reconcile net earnings (loss) to net cash (used)
provided by operating activities:
Depreciation 343 488
Amortization of intangible assets - 183
Loss on disposal of property, plant and equipment 6 73
Deferred income taxes (1) (452)
Stock compensation 51 47
Changes in assets and liabilities (see below) (2,081) 909
------------ ------------
Net cash (used) provided by operating activities (1,604) 412
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (27) (471)
------------ ------------
Net cash used by investing activities (27) (471)
------------ ------------
Cash flows from financing activities:
Proceeds from bank line of credit borrowings 1,650 50
Repayment of bank line of credit borrowings (200) (50)
Purchase of treasury shares (71) (80)
------------ ------------
Net cash provided (used) by financing activities 1,379 (80)
------------ ------------
Net decrease in cash (252) (139)
Cash and cash equivalents at beginning of period 607 406
------------ ------------
Cash and cash equivalents at end of period $ 355 267
============ ============
Changes in assets and liabilities (using) providing cash:
Receivables $ (3,495) 3,336
Prepaid expenses (163) (219)
Accounts payable 73 (69)
Accrued expenses 1,504 (1,809)
Other liabilities - (330)
------------ ------------
Total $ (2,081) 909
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 4 11
============ ============
See accompanying notes to condensed financial statements
5
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
1. In the opinion of Ablest Inc. (the Company) management, the accompanying
condensed financial statements contain all normal recurring adjustments
necessary to fairly present the Company's financial position as of June 30,
2002 and the results of its operations and cash flows for the twenty-six
week periods ended June 30, 2002 and July 1, 2001.
2. The results of operations for the thirteen week period and twenty-six week
period ended June 30, 2002 is not necessarily indicative of the results to
be expected for the full year.
The condensed financial statements, including the condensed balance sheet
as of December 30, 2001 (which has been derived from audited financial
statements at that date) are presented in accordance with the requirements
of form 10Q and consequently may not include all disclosures normally
required by generally accepted accounting principles or those normally made
in an annual report on form 10K. These interim condensed financial
statements are unaudited and should be read in conjunction with the audited
financial statements and footnotes included in form 10K.
During the second quarter, a misclassification in the company's first
quarter statement of operations was identified. The misclassification
relates to a tax benefit of approximately $201,000, which was reflected as
other income in the first quarter. The tax benefit resulted from the
resolution of an IRS audit of the Company's fiscal 1998 tax return. As such
amount relates to an income tax benefit it should have been classified on
the tax provision line item of the statement of operations. This amount has
now been reclassified to the tax provision line item in the statement of
operations for the twenty-six week period ended June 30, 2002. This
reclassification of first quarter had the impact of increasing the
Company's first quarter loss before income taxes from $327,000 to a loss of
$528,000. The income tax expense (benefit) line item changed from zero, to
a benefit of $201,000, and there was no impact on net income, as the
Company did not reflect a tax benefit on the loss reported in first
quarter.
There has been no significant change in accounting policy of the Company
during the periods presented except as noted herein under note 6 to these
Notes to Condensed Financial Statements. For a description of all policies,
refer to Note 1 of the Notes to Financial Statements as included in the
Company's 2001 Annual Report.
Certain reclassifications have been made to prior year balances, to conform
to current period classifications.
3. Stockholders' Equity. The changes in stockholders' equity for the
twenty-six week period ended June 30, 2002 are summarized as follows (in
thousands, except shares):
Additional Unearned Receivable Total
Common Paid-in Retained Treasury Stock Restricted Stock Stockholder's
Stock Capital Earnings Shares Amount Stock sale Equity
----- ------- -------- ------ ------ ----- ---- ------
Balance at December 30, 2001 $ 165 $ 4,936 $ 11,048 387,239 $ (1,756) $ (108) $ (22) $ 14,263
Net income - - 78 - - - - 78
Stock compensation awards - - - - - 51 - 51
Stock repurchase program - - - 15,946 (71) - - (71)
Balance at June 30, 2002 ------ --------- -------- ------- -------- ------ ----- ---------
$ 165 $ 4,936 $ 11,126 403,185 $ (1,827) $ (57) $ (22) $ 14,321
====== ========= ======== ======= ======== ====== ===== =========
4. Stock Options. For the 26 week period ended June 30, 2002, options to
purchase 6,000 shares of common stock of the Company were granted upon the
re-election of the independent directors to the Company's board of
directors as per the terms of the Company's Independent Directors' Stock
Option Plan. The options were granted and are exercisable at the closing
market rate on May 23, 2002, the date of the Company's annual meeting of
shareholders'. Options become 100% vested one year from the date of grant.
At June 30, 2002 the Company had exercisable options outstanding to
independent directors and former employees to purchase 54,008 common shares
at prices ranging from $4.60 to $7.31 per share. The effect of unexercised
stock options determined under the treasury method was anti-dilutive for
all periods presented.
6
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
5. Industry Segments. The Company's sole business is in providing staffing
services on a temporary and contract basis. Management of the Company views
its operations as having two operating segments: Commercial staffing
services, consisting mostly of clerical and light industrial staffing
services and information 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 as of and for the thirteen week periods and the
twenty-six week periods ended June 30, 2002 and July 1, 2001, respectively,
are provided below.
Thirteen Thirteen Twenty-six Twenty-six
(in thousands) Week period Week period Week period Week period
Ended Ended Ended Ended
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Commercial Staffing Services:
Net service revenues $ 24,041 18,325 41,095 36,941
Cost of services 19,701 14,549 33,616 29,306
----------------- ---------------- --------------- ---------------
Gross profit 4,340 3,776 7,479 7,635
Selling, general & administrative 2,796 3,001 5,316 6,305
----------------- ---------------- --------------- ---------------
Operating income 1,544 775 2,163 1,330
Trade receivables $ 12,869 9,756
Information Technology Staffing Services:
Net service revenues $ 2,193 2,696 4,366 5,926
Cost of services 1,710 2,092 3,411 4,647
----------------- ---------------- --------------- ---------------
Gross profit 483 604 955 1,279
Selling, general & administrative 333 559 645 1,158
----------------- ---------------- --------------- ---------------
Operating income 150 45 310 121
Amortization - 92 - 183
Trade receivables $ 1,032 1,511
Unallocated corporate expenses $ 1,275 1,279 2,436 2,592
Operating income on these segment statements differ from the operating
income reported on the Condensed Statements of Operations because it does
not include some corporate expenses. These corporate expenses include costs
associated with providing executive, administrative, information technology
and human resource services to field operations. These costs are not
allocated for segment purposes but have been fully charged to continuing
operations in the Condensed Statements of Operations.
6. New Accounting Pronouncements. In July 2001, the Financial Accounting
Standards Board (SFAS) issued Financial Accounting Standards No. 142 (SFAS
No. 142), "Goodwill and Other Intangible Assets". Under SFAS No. 142,
goodwill and indefinite lived intangible assets are no longer amortized but
are reviewed at least annually for impairment. At June 30, 2002, the
Company did not have indefinite lived intangible assets other than goodwill
and did not have any intangible assets with definite lives. The Company has
adopted SFAS No. 142 effective December 31, 2001, the first day of fiscal
2002. SFAS No. 142 prescribes a two-phase process for impairment testing of
goodwill. The first phase, required to be completed by June 30, 2002,
screens for impairment; while the second phase (if necessary), required to
be completed by December 29, 2002, measures the impairment. The Company
completed its first phase impairment analysis during the first fiscal
quarter of 2002 and found no instances of impairment of its recorded
goodwill; accordingly, the second testing phase, absent future indicators
of impairment, is not necessary during 2002.
7
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
6. New Accounting Pronouncement (continued).
The following is a reconciliation of reported net income to adjusted net
income after adding back discontinued amortization:
Thirteen Thirteen Twenty-six Twenty-six
(in thousands, except per share data) Week period Week period Week period Week period
Ended Ended Ended Ended
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Reported net income (loss) $ 405 (335) 78 (836)
Add back Goodwill amortization (net of tax) - 31 - 62
---------------- ---------------- ---------------- --------------
Adjusted net income (loss) $ 405 (304) 78 (774)
================ ================ ================ ==============
Reported basic and diluted
earnings (loss) per share $ .14 (.12) .03 (.29)
Add back Goodwill amortization (net of tax) - .01 - .02
---------------- ---------------- ---------------- --------------
Adjusted basic and diluted
earnings (loss) per share $ .14 (.11) .03 (.27)
================ ================ ================ ==============
In June 2001, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 143, (SFAS No. 143), "Accounting for Asset
Retirement Obligations." SFAS No. 143 applies to legal obligations
associated with the retirement of long-lived assets, except for certain
obligations of lessees. This Statement requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made.
The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset. This Statement is effective for
financial statements issued for fiscal years beginning after June 15, 2002
with initial application required as of the beginning of an entity's fiscal
year. The Company does not anticipate the financial impact of adoption of
the new pronouncement to be material.
In October 2001, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 144, (SFAS No. 144), "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 establishes a
single accounting model for long-lived assets to be disposed of by sale.
The Company adopted the provisions of SFAS No. 144 for its 2002 fiscal year
started on December 31, 2001. Adoption of SFAS No. 144 did not have a
material financial impact upon the Company.
In May 2001, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 145, (SFAS No. 145), "Rescission of SFAS
Statements No. 4, 44 and 64, Amendment of SFAS Statement No. 13 and
technical corrections as of April 2002." SFAS No. 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt", and an amendment
of that Statement, SFAS No. 44, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". This Statement also rescinds SFAS No. 64,
"Accounting for Intangible Assets of Motor Carriers" and amends SFAS No.
13, "Accounting for Leases", to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that
are similar to sale-leaseback transactions. This Statement also amends
other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under
changed conditions. Adoption of SFAS No. 145 is for financial statements
issued after May 15, 2002 and did not have a material financial impact upon
the Company.
In June 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 146, (SFAS No. 146), "Accounting for Exit or
Disposal Activities". SFAS 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring
8
ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)
6. New Accounting Pronouncement (continued).
activities that are currently accounted for pursuant to the guidance that
the Emerging Issues Task Force (EITF) has set forth in EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)". The scope of SFAS No. 146 also includes:
(1) costs related to terminating a contract that is not a capital lease and
(2) termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual deferred-compensation
contract. SFAS No. 146 will be effective for exit or disposal activities
that are initiated after December 31, 2002. Early application is
encouraged. The Company does not anticipate the financial impact of
adoption of the new pronouncement to be material.
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 that could cause actual results to differ
materially from those anticipated. This notice is intended to take
advantage of the safe harbor provided by the Private Securities Litigation
Reform Act of 1995 with respect to such forward-looking statements. Risks
and uncertainties include, but are not limited to, hiring and maintaining
qualified employees, legislative and judicial reforms which could increase
the cost of our services to our customers and make the use of staffing
service providers less beneficial, the proper functioning of our management
information systems and the continuing economic recession.
On January 1, 2001, the Company's subsidiaries Ablest Service Corp. (a
Delaware corporation), Milestone Technologies, Inc. (an Arizona
corporation) and PLP Corp. (an Alabama corporation) were formally merged
into Ablest Inc. (a Delaware corporation), to form a single operating
company under the Ablest Inc. name. The outstanding shares of the merging
corporations were cancelled and no shares of Ablest Inc. were issued in
exchange. The outstanding shares of Ablest Inc. remain outstanding and were
not affected by the merger.
For the past two years, the Company has reported the March 2000 sale of its
industrial maintenance operations and associated reserves as separate line
items on its financial statements, referenced as discontinued operations.
Effective with fiscal year 2002, the Company no longer will report
discontinued operations as a separate line item but will include remaining
reserves in the various line items that they pertain to. Applicable
balances on the fiscal 2001 financial statements have been reclassified to
provide for a comparative basis.
Results of Operations:
Service revenues for the second quarter of 2002 increased to $26.2 million
from $21.0 million in 2001. Year to date service revenues were $45.5
million in 2002 compared to $42.9 million in 2001. Revenues in the
commercial staffing services segment improved to $24.0 million from $18.3
million for the current quarter and to $41.1 million from $37.0 million for
the year to date period. The change in commercial staffing revenues was
mainly due to concentrated marketing efforts that resulted in increased
business from large industrial customers.
Service revenues in the Company's information technology staffing services
segment declined to $2.2 million from $2.7 million for the current quarter
and to $4.4 million from $6.0 million for the year to date period. The
information technology staffing services segment continues to feel the
effect of the slow down in the United States economy and an overall decline
in the information technology industry. Also contributing to this decline
was the loss of a high volume, low gross margin customer in the fourth
quarter of the prior year.
Gross profit for the second quarter of 2002 increased to $4.8 million from
$4.4 million in 2001. Year to date gross profit declined to $8.4 million
from $8.9 million in 2001. Gross margin for the current quarter declined to
18.4% from 20.8% in 2001 and to 18.6% from 20.8% for the year to date
period. Gross profit in the commercial staffing
9
Results of Operations (continued).
services segment increased to $4.3 million from $3.8 million during the
current quarter and decreased to $7.5 million from $7.6 million during the
year to date period. Gross margin for commercial staffing declined to 18.1%
from 20.6% and to 18.2% from 20.7% for the respective quarter and year to
date periods. The decline in gross margin is the result of increased
competition forcing downward pressure on pricing to secure business with
the large industrial customers noted earlier. Also contributing to this
lower gross margin was a decline in placement fees being generated by this
segment.
Gross profit in the Company's information technology staffing services
segment decreased to $0.5 million from $0.6 million during the current
quarter and to $1.0 million from $1.3 million year to date, compared to the
same periods one year earlier. Gross margin declined to 22.0% from 22.4%
and increased to 21.9% from 21.6% for the respective quarter and year to
date periods. The decline in gross profit is attributed to reduced service
revenues while the change in gross margin is being driven by the loss of
the major customer noted previously who was serviced at lower margins.
These increases were partially offset by increases in workers compensation
and health insurance expenses associated with full time consultants.
Selling, general and administrative expenses, exclusive of amortization
expense, declined to $4.4 million from $4.8 million for the current quarter
and to $8.6 million from $10.0 million year to date, compared to one year
earlier. Contributing to this decrease was the closing of seven field
offices in the prior fiscal year and cost reductions in the Company's
information technology staffing services offices. Additionally,
amortization expense decreased by $92,000 and $183,000 for the current
quarter and year to date period, respectively, due to the Company's
adoption of SFAS 142 at the beginning of the current year. Under SFAS 142,
goodwill and indefinite lived intangible assets are no longer amortized but
are reviewed at least annually for impairment. SFAS 142 prescribes a
two-phase process for impairment testing of goodwill. The first phase,
required to be completed by June 30, 2002, screens for impairment while the
second phase (if necessary) measures the impairment and is to be completed
by the end of the Company's current fiscal year. The Company completed its
first phase testing during the first quarter and found no instances of
impairment of its recorded goodwill; accordingly, the second phase testing,
absent future indicators of impairment, is not necessary during 2002.
Other income expense, net, decreased to a net other expense of $14,000 from
a net other income of $13,000 for the current quarter compared to the same
quarter one year ago. Net other income increased to $39,000 from $28,000
for the year to date period. The decrease in the current quarter is the
result of interest expense on the Company's line of credit borrowings used
to finance working capital requirements resulting from the growth in
revenues. The year to date increase resulted from the interest income of
$32,000 received in conjunction with a federal income tax refund for the
Company's amended 1998 Federal Income Tax return.
No tax benefit was recorded against the year to date loss based upon the
deferred tax assets that are expected to be realized from projected future
taxable income. The year to date benefit of $201,000 represents the refund
received with respect to the 1998 amended federal income tax noted above.
During the second quarter, a misclassification in the Company's first
quarter statement of operations was identified. The misclassification
relates to a tax benefit of approximately $201,000, which was reflected as
other income in the first quarter. The tax benefit resulted from the
resolution of an IRS audit of the Company's fiscal 1998 tax return. As such
amount relates to an income tax benefit it should have been classified on
the tax provision line item of the statement of operations. This amount has
now been reclassified to the tax provision line item in the statement of
operations for the twenty-six week period ended June 30, 2002. This
reclassification of first quarter had the impact of increasing the
Company's first quarter loss before income taxes from $327,000 to a loss of
$528,000. The income tax expense (benefit) line item changed from zero, to
a benefit of $201,000, and there was no impact on net income, as the
Company did not reflect a tax benefit on the loss reported in first
quarter.
10
Liquidity and Capital resources:
The following financial information is provided as of a balance sheet date
of June 30, 2002.
The quick ratio was 2.3 to 1 and 3.4 to 1 at June 30, 2002 and December 30,
2001, respectively. The current ratio was 2.6 to 1 compared to 4.0 to 1,
for the same respective periods. Net working capital increased by $305,000
during the current year. Contributing to the increase was an increase in
accounts receivable of $3.5 million and prepaid expenses of $163,000.
These increases in working capital were partially offset by increases in
accrued expenses of $1.5 million and short-term line of credit borrowings
of $1.5 million, plus a decrease in cash of $252,000. The increases in
accounts receivable, accrued expenses and short-term line of credit
borrowings are the result of the increased revenue being generated in the
current period. The increase in prepaid expenses is the result of the
renewal of the Company's insurance program at the beginning of the fiscal
year. Reference should be made to the Statement of Cash Flows, which
details the sources and uses of cash.
Capital expenditures of $11,000 during the current quarter were used mainly
for the purchase of computer hardware and software.
Open credit commitments at June 30, 2002 were $3.5 million. The Company
maintains a Standard LIBOR Grid Note Agreement ("LIBOR Agreement"). The
LIBOR Agreement allows borrowing for general corporate needs of up to $5.0
million with interest calculated at the bank's then prime lending rate or,
at the Company's option, using a formula which adds 250 basis points or
2.5% to the 30, 60 or 90 day London Interbank Offered Rate. The LIBOR
Agreement is a one-year demand note that has been renewed and extended
until July 22, 2003 and is renewable annually thereafter with the consent
of both parties. The LIBOR Agreement does not contain working capital or
other financial covenants. However, since the Company must repay any
borrowings under the LIBOR Agreement on demand, there is no guarantee that
the Company will be able to maintain or obtain the desired funding if, for
any reason, the financial institution does not wish to continue to extend
credit to the Company. At the current time, given the Company's financial
condition, the nature of its business which does not require attainment or
maintenance of high levels of working capital and its historical
relationship with the financial institution, the Company believes that it
will be able to borrow required funds under the LIBOR Agreement. If,
however, the financial institution were to demand repayment of the
borrowings (or decline to provide funding) under the LIBOR Agreement for
any reason, the Company would be in the position of having to secure, from
other sources, funding to finance its working capital requirements. Such
new sources could require commitment fees, financial covenants and other
conditions, taking into consideration such factors as the health of the
national economy, staffing industry performance and trends, and the
Company's financial condition, performance and prospects. In such event,
there is no guarantee that the Company would be able to secure such funding
on favorable terms.
It is anticipated that existing funds, cash flows from operations and
available borrowings will be sufficient to cover working capital
requirements and capital expenditures for the remainder of fiscal 2002.
Quantitative and Qualitative Disclosure About Market Risk
The Company, in the normal course of business, has exposure to interest
rate risk from its line of credit agreement. The Company does not believe
that its exposure to fluctuations in interest rates is material. A 10%
change in the interest rate utilized on its line of credit
borrowings would have produced less than $1,000 in additional interest
expense for the year to date period ending June 30,2002.
Due to the immateriality of the above noted market risk, the Company has
decided not to utilize any form of financial instrument as a hedge against
this risk.
11
PART II-OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(A) The Company's 2002 Annual Meeting of Shareholders was held on
May 23, 2002, to elect six directors of the Company and to
vote on the adoption of the Ablest Inc. Restricted Stock Plan.
(B) The following directors, comprising the entire Board of
Directors of the company, were re-elected to the board for a
term of one year expiring at the date of the Company's 2003
Annual Meeting of Shareholders, Messrs. Charles H. Heist, W.
David Foster, Charles E. Scharlau, Ronald K. Leirvik, Richard
W. Roberson and Ms. Donna R. Moore.
(C) Shareholders approved adoption of the Company's Restricted
Stock Plan with a vote of 2,049,405 for adoption, 161,983
against adoption, 3,350 abstaining with 470,827 broker
non-votes.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits.
Exhibit 99.1: Certification of Chief Executive Officer
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 99.2: Certification of Chief Financial Officer
pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(B) Reports on Form 8-K:
On June 10, 2002, the Company filed a report on Form 8-K
regarding a Change in Registrant's Certifying Accountants to
PricewaterhouseCoopers LLP from Arthur Andersen LLP effective
for the fiscal year ending December 29, 2002.
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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: August 12, 2002 /s/ Mark P. Kashmanian
-----------------------
Mark P. Kashmanian
Chief Accounting Officer
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