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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, 1997
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 (212) 319-8400
area code:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
-----
The number of shares of the registrant's Common Stock, par value $0.01 per
share, outstanding on January 27, 1998 was 6,446,701.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ASI SOLUTIONS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1997
(UNAUDITED)
------------------ ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 2,883,155 $ 60,190
Accounts receivable, net 6,806,782 4,184,886
Prepaid expenses and other current assets 268,657 343,455
Deferred income taxes 5,910 5,910
Notes receivable from stockholders 389,191
------------------ ---------------
Total current assets 9,964,504 4,983,632
Property and equipment, net 5,218,286 2,219,801
Intangible assets, net 24,180,349 1,121,815
Deferred financing costs 478,633
Other assets 271,773 269,990
------------------ ---------------
Total assets $40,113,545 $8,595,238
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Notes payable to bank $ 2,372,579 $1,844,000
Current portion, long-term debt 267,667 66,506
Current portion, notes payable 1,666,666
Accounts payable and accrued expenses 3,103,703 1,874,139
Accrued income taxes 1,046,584
------------------ ---------------
Total current liabilities 7,410,615 4,831,229
Deferred income taxes 78,303 78,303
Notes payable to bank, less current portion 14,214,246
Long-term debt, less current portion 66,917 306,626
Notes payable, less current portion 3,333,334
Other liabilities 205,053 136,194
------------------ ---------------
Total liabilities 25,308,468 5,352,352
Stockholders' Equity:
Common stock 65,123 46,252
Additional paid in capital 10,846,665 1,109,218
Currency translation adjustment (11,550)
Retained earnings 4,297,570 3,052,450
------------------ ---------------
15,197,808 4,207,920
Less: Treasury stock at cost (45,534 shares) (392,731)
Deferred offering costs (965,034)
------------------ ---------------
Total stockholders' equity 14,805,077 3,242,886
------------------ ---------------
Total liabilities & stockholders' equity $40,113,545 $8,595,238
================== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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ASI SOLUTIONS INCORPORATED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
FOR THE 3 MONTHS AND 9 MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
3 MONTHS ENDED 9 MONTHS ENDED
DECEMBER DECEMBER DECEMBER DECEMBER
31, 1997 31, 1996 31, 1997 31, 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue $9,385,226 $4,805,828 $21,990,577 $12,858,779
Cost of services 4,528,056 2,321,492 11,291,997 5,905,213
----------- ----------- ------------ ------------
Gross profit 4,857,170 2,484,336 10,698,580 6,953,566
Operating expenses:
General and administrative 2,270,606 726,384 4,907,233 2,206,820
Sales and marketing 805,081 514,254 2,251,051 1,253,957
Research and development 392,799 385,256 1,228,043 842,876
----------- ----------- ------------ ------------
Income from operations 1,388,684 858,442 2,312,253 2,649,913
Interest (expense) income, net (235,698) 20,652 (122,457) (13,265)
----------- ----------- ------------ ------------
Income before provision for income taxes 1,152,986 879,094 2,189,796 2,636,648
Provision for income taxes 494,784 404,272 944,676 1,444,836
----------- ----------- ------------ ------------
Net income $ 658,202 $ 474,822 $ 1,245,120 $ 1,191,812
=========== =========== ============ ============
Basic earnings per share $ 0.10 $ 0.10 $ 0.20 $ 0.26
=========== =========== ============ ============
Diluted earnings per share $ 0.10 $ 0.10 $ 0.19 $ 0.26
=========== =========== ============ ============
Weighted average common shares outstanding:
Basic shares 6,437,534 4,625,158 6,308,257 4,625,158
Plus diluted effect of stock
options and warrants 193,863 42,246 169,094 42,246
----------- ----------- ------------ ------------
Diluted shares 6,631,397 4,667,404 6,477,351 4,667,404
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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ASI SOLUTIONS INCORPORATED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 9 MONTHS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flow from operating activities:
Net income: $ 1,245,120 $ 1,191,812
Adjustments to reconcile net income to
net cash:
Depreciation and amortization 785,167 282,167
Provision for doubtful accounts 38,000
Accrual of straight-line rent 68,859 (7,627)
Other (15,090)
Deferred income taxes (13,728)
Changes in assets and liabilities:
Accounts receivable (2,659,896) (1,308,346)
Prepaid expenses and other current assets 74,798 (15,025)
Other assets (4,923) (132,089)
Notes receivable from stockholders (19,096)
Accounts payable and accrued
Expenses 1,229,564 363,448
Income taxes (1,046,584) 247,625
------------ -----------
Net cash (used in) provided by operating activities (284,985) 589,141
------------ -----------
Cash flow from investing activities:
Fixed asset additions (3,598,057) (1,456,410)
Purchase of minority stockholder interest (95,000)
Acquisition of business - McLagan Partners (22,213,183)
Acquisition of business - ELS (1,016,500)
------------ -----------
Net cash (used in) investing activities (26,827,740) (1,551,410)
------------ -----------
Cash flow from financing activities:
Proceeds from borrowings, net 16,456,533 1,038,785
Repayment of long-term debt (2,242,195)
Issuance of note payable 5,000,000
Proceeds from issuance of common stock, net 10,721,352
------------ -----------
Net cash provided by financing activities 29,935,690 1,038,785
------------ -----------
Net increase in cash 2,822,965 76,516
Cash at beginning of period 60,190 69,583
------------ -----------
Cash at end of period $ 2,883,155 $ 146,099
============ ===========
Supplemental disclosures of non
cash investing and financing activities:
Transfer of common stock back to the
Company in full satisfaction of
Shareholder debt of $389,191 in 1997.
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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ASI SOLUTIONS INCORPORATED AND SUBSIDIARIES
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 are wholly owned subsidiaries of
the Company. C/3/ Solutions Incorporated ("C/3/") was formed on September 16,
1996 as a wholly owned subsidiary of the Company. On August 29, 1997, the
Company's newly created subsidiary, T/3/ Solutions Incorporated ("T/3/"),
acquired the assets of Effective Learning Systems and on November 13, 1997, the
Company's newly created subsidiary McLagan Partners Incorporated ("McLagan
Partners") acquired substantially all of the assets of McLagan Partners
Incorporated and subsidiaries of McLagan Partners, McLagan Partners
International Incorporated ("McLagan International") and McLagan Partners Asia
Incorporated ("McLagan Asia") acquired substantially all of the assets of
McLagan Partners International Incorporated and McLagan Partners Asia
Incorporated respectively. The Company, Assessment Solutions, PRI, C/3/, T/3/,
McLagan Partners, McLagan International and McLagan Asia are hereinafter
referred to collectively as the "Company."
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 $9,039,000.
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. In addition, effective on the Offering date,
the Board of Directors of the Company were authorized to issue up to 2 million
shares of Preferred Stock in one or more classes or series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences, and the number of shares constituting any series or the designation
of such series. However, pursuant to the Certificate, the holders of Preferred
Stock would not have cumulative voting rights with respect to the election of
directors. Any such Preferred Stock issued by the Company may rank prior to the
Common Stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of Common
Stock.
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.
The accompanying unaudited interim financial statements of ASI Solutions
Incorporated 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
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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, 1997. The results of the nine months ended December 31, 1997
and 1996 are not necessarily indicative of the results of operations for the
entire year.
The financial statements of foreign subsidiaries, 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 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 shareholders' equity.
2. OPERATIONS:
----------
THE COMPANY
Assessment Solutions is a management consulting firm with primary emphasis on
research and the application of simulation technology to the assessment of
sales, service and management personnel. PRI provides pre-employment and post-
employment background checks. C/3/ provides monitoring services for clients who
engage in large-scale use of call centers for their customer contact functions.
McLagan provides compensation surveys and services to the financial industry.
IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share ("SFAS No. 128"). Statement
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
In June 1997, the Financial Accounting Standards Board issued 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. SFAS No. 130 becomes effective in fiscal 1999.
Management has not yet evaluated the effects of this change on the Company's
financial statements.
In June 1997, the Financial Accounting Standards Board issued 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. SFAS 131 becomes effective in fiscal 1999. Management has
not yet evaluated the effect of this change on the Company's financial
statements.
2
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USE OF OFFERING PROCEEDS
The Company has used approximately $3 million of the offering proceeds to repay
debt, $2.2 million to purchase equipment, $637,000 related to the acquisition of
Effective Learning Systems, $2.5 million related to the acquisition of McLagan
Partners Incorporated and has invested the remainder in liquid short term
investments.
3. STOCKHOLDERS' EQUITY:
---------------------
A SUMMARY OF THE CHANGES IN STOCKHOLDERS' EQUITY FOR THE 9 MONTHS ENDED DECEMBER
31, 1997 IS AS FOLLOWS:
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY DEFERRED
COMMON PAID-IN TRANSLATION RETAINED OFFERING TREASURY
SHARES STOCK CAPITAL ADJUSTMENT EARNINGS COSTS STOCK TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1997 4,625,158 $46,252 $ 1,109,218 $3,052,450 $(965,034) $ 3,242,886
Issuance of Common
Stock in initial public
offering and payment of
offering costs 1,800,000 18,000 9,021,220 965,034 10,004,254
Transfer of Common Stock
back to the company (45,534) $(392,731) (392,731)
Issuance of Common Stock
for Employee Stock
Purchase Plan 17,077 171 86,927 87,098
Issuance of Common Stock
for acquisition of McLagan 50,000 500 449,500 450,000
Partners, Inc.
Issuance of Common Stock
related to bank financing 20,000 200 179,800 180,000
Currency Translation
Adjustment $(11,550) (11,550)
Net Income 1,245,120 1,245,120
------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 6,466,701 $65,123 $10,846,665 $(11,550) $4,297,570 $(392,731) $14,805,077
======================================================================================================
</TABLE>
4. ACQUISITION OF MCLAGAN PARTNERS INCORPORATED:
--------------------------------------------
On November 13, 1997, the Company acquired substantially all of the assets
(primarily fixed assets of $501,478) and businesses of McLagan Partners
Incorporated and its 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 common stock, par value $.01 per share, of ASI, and the Company incurred
$764,661 of costs associated with the acquisition. The Company also discharged
approximately $1 million of McLagan's outstanding liabilities and agreed to make
deferred payments in aggregate amount of $1 million, on April 30, 2000, to
certain employees of McLagan, provided that such employees continue to be
employed by the McLagan Subsidiaries as of such date. Simultaneously with the
execution of the purchase agreements, the Company also granted stock options to
purchase an
3
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aggregate of 300,000 shares of common stock under its 1996 Stock Option and
Grant Plan to certain employees of the McLagan subsidiaries.
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,
$22,213,183 of the purchase price has been allocated to goodwill, customer lists
and other intangibles which are being amortized on a straight line basis over a
period 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.
The operating results of the acquisition have been included in the consolidated
statement of income from the date of the acquisition. The following pro forma
information has been prepared assuming that this acquisition had taken place at
the beginning of the respective periods. The pro forma information includes
adjustments for amortization of intangibles arising from the transaction, the
interest expense related to the debt incurred to finance the transaction, and an
adjustment of the tax provisions for fiscal 1996 and 1997 representing the
statutory federal rate assuming that McLagan had always been a C Corporation.
The pro forma financial information is not necessarily indicative of the results
of operation as they would have been had the transaction been effected on the
assumed dates.
<TABLE>
<CAPTION>
9 MONTHS ENDED YEAR ENDED
DECEMBER 31, 1997 MARCH 31, 1997
----------------- --------------
<S> <C> <C>
Revenue $27,044,210 $32,566,662
Net Income $ 779,586 $ 1,754,903
Earnings per share $ .12 $ .27
</TABLE>
5. CREDIT AGREEMENT:
----------------
On November 13, 1997, the Company entered into a Credit Agreement with several
banks. The Credit Agreement consists of a $15 million term loan, the proceeds
of which were used in the financing of the acquisition of McLagan, and a $5
million revolving credit facility.
The term loan bears interest at the prime rate plus 0.25 percent or the
eurodollar rate plus 3.25 percent. The payment schedule under the term loan
calls for quarterly installment payments beginning on March 31, 1998. The
annual payments for fiscal years ended March 31, 1999, 2000, 2001, 2002, 2003,
are as follows: $1,625,000, $2,250,000, $3,250,000, $4,125,000 and $3,375,000.
Borrowing under the revolving credit facility bears interest at the prime rate
or an optional eurodollar based rate.
The Credit Agreement expires on November 13, 2002 at which time any outstanding
principal and interest is payable. The Credit Agreement has various restrictive
covenants and is collateralized by all of the assets of the Company.
4
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As of December 31, 1997, borrowings under the term loan were $15,000,000 and
borrowings under the revolving credit facility were $700,000. Interest expense
for the 9 month period ended December 31, 1997 was $313,215.
6. PROVISION FOR INCOME TAXES:
--------------------------
The provision for income taxes declined to 42.9% from 46% due primarily to
higher costs in the same period for fiscal 1997 resulting from an Internal
Revenue Service examination and lower New York City taxes in 1998 resulting from
the transfer of a significant portion of operations out of New York City.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
QUARTERLY COMPARISON OF RESULTS OF OPERATIONS
The Company's third quarter revenue increased 95.3% to $9.4 million from $4.8
million in the third quarter of fiscal 1997. Net income was $658,000, or 7% of
revenue, up 38.6% from $475,000, or 9.9% of revenue, in the third quarter of
fiscal 1997. The increase in net income is primarily due to contribution from
McLagan, the new compensation and consulting business acquired in November 1997.
Revenue increased in all business areas. Assessment and Selection revenue was
$2.5 million, an increase of $0.8 million, or 46.1%, principally due to
increased revenue with existing clients.
Employment Process Administration revenue was $3.1 million, an increase of $0.9
million, or 38.9%, due principally to higher volume with a large client and the
expansion of services provided to that client.
Customer Contact Monitoring revenue was $0.5 million, an increase of 15% from
the third quarter of last year. This is a new business area and the increase
was due to services provided to three new clients.
Training and Development revenue was $0.5 million, an increase of 16%. Revenue
from new programs in connection with the August 1997 acquisition of Effective
Learning Systems accounts for the increase.
Compensation Survey and Consulting, a new business area resulting from the
McLagan acquisition, revenue was $2.8 million, accounting for approximately 60%
of the revenue increase of $4.6 million over last year's third quarter.
Cost of services increased $2.2 million, or 95.1%, to $4.5 million. The new
Compensation Survey and Consulting area accounted for $0.9 million of the
increase. The remainder of the increase was due to
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both personnel additions and higher facility and equipment expenses. As a
percentage of revenue, cost of services was 48.2% compared to 48.3% in last
year's quarter.
General and administrative expense increased $1.5 million, or 212.6%, to $2.3
million. Compensation Survey and Consulting accounted for $0.9 million of the
increase. Outside services associated with operating as a publicly owned entity,
higher fixed expenses associated with the new corporate offices and amortization
of goodwill associated with the acquisition of McLagan contributed to the
increase. As a percentage of revenue, general and administrative expense
increased from 15.1% to 24.2%.
Sales and marketing expense increased by $0.3 million, or 56.6%, to $0.8 million
principally due to the addition of senior staff to manage business units and
sales areas, and to higher spending incurred to promote business volume. As a
percentage of revenue, sales and marketing expense decreased from 10.7% to 8.6%.
Research and development expense was $0.4 million, approximately the same as
last year. As a percentage of revenue, research and development expense was
4.2%, down from 8.0% last year.
As a percentage of pre-tax income, the provision for income taxes declined to
42.9% from 46% due primarily to higher costs in the same period for Fiscal 1997
resulting from an Internal Revenue Service examination and lower New York City
taxes in 1998 resulting from the transfer of a significant portion of operations
out of New York City.
Net interest expense was $236,000 compared to net interest income of $21,000
last year. The interest expense was primarily due to interest incurred on the
$20 million of debt incurred in the acquisition of McLagan.
(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
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YEAR-TO-DATE COMPARISON OF RESULTS OF OPERATIONS
The Company's year to date revenue increased 71% to $22 million from $12.9
million. Net income was $1.25 million or 5.7% of revenue, up 4.5% from $1.19
million, or 9.3% of revenue, in the first nine months of fiscal 1997. The newly
acquired Compensation Survey and Consulting business area accounted for $2.8
million of the revenue increase. Expenses associated with addition of personnel,
including several senior managers, and the increase in facilities, such as the
new operations center, account for most of the decline in the net income
percentage.
Year to date revenue increased in all business areas. Assessment and Selection
revenue was $7.7 million, an increase of $3.2 million, or 71.2%, principally due
to increased revenue with existing clients and the addition of several new
clients.
Employment Process Administration revenue was $8.4 million, an increase of $1.9
million, or 29.1%, due principally to higher volume with a major client and the
expansion of services provided to that client.
Customer Contact Monitoring revenue was $1.4 million, an increase of $0.9
million from last year. This is a new business area and the increase was due to
services provided to new clients, three of which were added in the third
quarter.
Training and Development revenue was $1.7 million, an increase of $0.3 million,
or 24.3%, and due in part to the addition of new clients and the acquisition of
Effective Learning Systems.
Compensation Survey and Consulting revenue, a new business area, was $2.8
million.
Cost of services increased $5.4 million, or 91.2%, to $11.3 million primarily
due to personnel additions and higher equipment expenses needed to meet the
increased business volume and to staff the new operations center. Expenses from
the recently acquired Compensation Survey and Consulting business area also
contributed to this increase. As a percentage of revenue, cost of services
increased to 51.3% from 45.9% due primarily to personnel and fixed expenses
incurred to expand the operations center capacity.
General and administrative expense increased $2.7 million, or 122.4%, to $4.9
million due to personnel additions in senior management and the finance staff as
well as higher outside services associated with operating as a publicly owned
entity. Higher fixed expenses associated with the new corporate offices, and
the amortization of goodwill associated with the acquisition of McLagan also
contributed to the increase. Compensation Survey and Consulting accounted for
$0.9 million of this increase. As a percentage of revenue, general and
administrative expense increased from 17.2% to 22.3%.
Sales and marketing expense increased by $1.0 million, or 79.5%, to $2.3 million
principally due to the addition of senior staff to manage business units and
sales areas, and to higher spending incurred to
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promote awareness of the Company and business volume. As a percentage of
revenue, sales and marketing expense increased from 9.8% to 10.2%.
Research and development expense was $1.2 million, an increase of $0.4 million
from last year due to increased personnel, outside services and conference
expenses. As a percentage of revenue, research and development expense was
5.6%, down from 6.6% last year.
Net interest expense increased due to the interest on the $20 million of debt
incurred to acquire McLagan partially offset by the investment of the proceeds
of the initial public offering in April 1997.
As a percentage of pre-tax income, the provision for income taxes declined to
43.1% from 54.8% due primarily to higher costs in the same period for fiscal
1997 resulting from an Internal Revenue Service examination and lower New York
City taxes resulting from the transfer of a significant portion of operations
out of New York City.
(Percentages are based on actual amounts as opposed to the rounded amounts shown
above.)
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from capital requirements, capital
expenditures and principal and interest payments on debt. The Company funds its
operating and capital needs with cash flow generated from operations,
supplemented by short-term borrowings under bank lines of credit and long-term
equipment financing. The Company raised approximately $9 million after expenses
in an Initial Public Offering in April, 1997.
Cash flow used in operations was $284,985 in the first three quarters of fiscal
1998 due to higher receivables resulting from the growth in sales, a reduction
in accounts payable and accrued expenses and two income tax payments. Cash flow
used in investing activities of $26,827,740 was primarily for the acquisition of
McLagan and Effective Learning Systems and for the purchase of furniture,
computer and telecommunications equipment for the new operations center in
Melville, New York.
In November 1997, a new bank Credit Agreement was established which provided a
$15 million term loan and a $5 million revolving credit facility. This
agreement expires November 13, 2002. The Company also has a $1.9 million
equipment lease facility. At December 31, 1997, there were borrowings of
$700,000 against the revolving credit facility and $886,825 against the
equipment lease facility.
The Company has used approximately $3 million of the offering proceeds to repay
debt, $2.2 million to purchase equipment, $637,000 related to the acquisition of
Effective Learning Systems, $2.5 million related to the acquisition of McLagan
Partners Incorporated and has invested the remainder in liquid short term
investments.
8
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IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share ("SFAS No. 128"). Statement
128 replaced the previously reported primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share is very
similar to the previously reported fully diluted earnings per share. All
earnings per share amounts for all periods have been presented, and where
necessary, restated to conform to the Statement 128 requirements.
In June 1997, the Financial Accounting Standards Board issued 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. SFAS No. 130 becomes effective in fiscal 1999.
Management has not yet evaluated the effects of this change on the Company's
financial statements.
In June 1997, the Financial Accounting Standards Board issued 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. SFAS 131 becomes effective in fiscal 1999. Management has not
yet evaluated the effect of this change on the Company's financial statements.
NOTE ON FORWARD-LOOKING STATEMENTS
Certain statements in this 10Q 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.
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, and changes in the
general economy such as inflationary pressure which could increase the Company's
cost of borrowing and those factors discussed in the section entitled "Risk
Factors" as well as those discussed elsewhere in the Company's prospectus from
its initial public offering (a copy which will be provided without charge upon
request to the Company.) 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
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not Applicable.
10
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the Company's Initial Public Offering, the Company
filed a registration statement (the "Registration Statement") under the
Securities Act of 1933, as amended, whereby the Company registered
shares of its common stock, $.01 par value. The Registration Statement
was effective on April 9, 1997 and was assigned an SEC file number of
2-20401. The offering commenced on April 16, 1997 and all of the
securities registered in connection with the offering have been sold.
The managing underwriter was H.C. Wainwright & Co., Inc. The Company
received net proceeds of approximately $9,039,000 (the "Proceeds").
Since the effective date, the Company has spent the following
approximate amounts of the Proceeds toward the purposes indicated:
<TABLE>
<S> <C>
Working Capital $ 665,212
Repayment of Debt 3,064,000
Purchase of Equipment 2,186,211
Acquisition of Effective Learning Systems 636,916
Acquisition of McLagan Partners Incorporated 2,486,661
</TABLE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
10.1* Amendment No. 06 dated October 6, 1997
to the agreement by and between
Assessment Solutions Incorporated and
TeleSector Resources Group, Inc., d/b/a
Bell Atlantic Network Services (the
"Bell Atlantic Contract")
10.2* Bell Atlantic Contract
Amendment No. 07 dated January 12, 1998
to the Bell Atlantic Contract
27.1 Financial Data Schedule.
</TABLE>
________________________________________________________________________________
Portions of this document have been omitted pursuant to a request for
confidential treatment.
11
<PAGE>
(b) A Form 8K was filed on November 13, 1997 regarding the acquisition of
substantially all of the assets and business of McLagan Partners
Incorporated and its related entities McLagan Partners International
Incorporated and McLagan Partners Asia Incorporated (collectively, the
"McLagan Companies"). The Financial Statements of the McLagan
Companies along with pro forma financial information reflecting the
acquisition were filed by amendment to this 8-K on January 27, 1998.
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 , 1998 By:/s/ MICHAEL J. MELE
---------------------------------
Michael J. Mele
Vice President and Chief Financial Officer
(on behalf of the registrant and as principal
financial and accounting officer)
12
<PAGE>
EXHIBIT 10.1
------------
Bell Atlantic
240 East 38th Street
New York, NY 10016
[LOGO OF BELL ATLANTIC APPEARS HERE]
CONTRACT NO. G12463P
AMENDMENT NO. 06
ACCEPTANCE SHALL BE INDICATED BY
(1) SIGNING AND (2) RETURNING DUPLICATE TO:
------- -------------------
Assessment Solutions, Incorporated Telesector Resources Group, Inc.
780 Third Avenue 240 E. 38th Street, 15th Flr.
New York, NY 10017 New York,, NY 10016
Attn: Mr. Eli Salig Attn: Mr. Sean M. Mahoney
SERVICE: Consulting Services (Employment Staffing Assessment).
Telesector Resources Group, Inc., d/b/a Bell Atlantic Network Services
(hereinafter "Bell Atlantic") Agreement No. G12463P with you, dated April 1,
1996, is hereby modified by this Amendment No. 06 as follows:
THE SECTION MARKED "1. TERM: SCOPE OF WORK" - SUBSECTION 'A' IS HEREBY CHANGED
TO READ:
"THE AGREEMENT SHALL BE EFFECTIVE ON APRIL 1, 1996 AND SHALL END SEPTEMBER 30,
2000, PROVIDED THAT BELL ATLANTIC MAY EXTEND THIS AGREEMENT FOR PERIODS OF UP TO
ONE (1) YEAR BY GIVING YOU WRITTEN NOTICE AT LEAST THIRTY (30) DAYS PRIOR TO
SEPTEMBER 30, 2000. ANY TERMINATION OR EXPIRATION OF THIS AGREEMENT SHALL NOT
AFFECT THE OBLIGATIONS OF EITHER PARTY TO THE OTHER UNDER EXISTING STATEMENTS OF
WORK ISSUED UNDER THIS AGREEMENT, BUT SUCH SHALL CONTINUE IN EFFECT AS THOUGH
THIS AGREEMENT HAD NOT BEEN TERMINATED."
SERVICES PROVIDED UNDER THIS AMENDMENT WILL BE IN ACCORDANCE WITH THE "AMENDED
STATEMENT OF WORK," ATTACHED HERETO AS EXHIBIT A.
All other Terms and Conditions of the Agreement are reaffirmed and remain in
effect to the extent that they do not conflict with this Agreement.
(1) Sign Here and (2) Return To Address Above:
---- -----------------------
AGREED AND ACCEPTED:
ASSESSMENT SOLUTIONS, INCORPORATED TELESECTOR RESOURCES GROUP, INC.
(A BELL ATLANTIC COMPANY)
By: /s/ Eli Salig By: /s/ L. Garrambone
-------------------------------- -------------------------------
Name: Eli Salig Name: L. Garrambone
------------------------------ -----------------------------
Title: Exec VP Title: Vice President
----------------------------- ----------------------------
Date: 10-1-97 Date: 10/6/97
------------------------------ ----------------------------
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
EXHIBIT A
AMENDED STATEMENT OF WORK
This Amendment to the Statement of Work, entered into by Assessment Systems,
Incorporated ("Consultant") and Telesector Resources Group, Inc. ("Bell
Atlantic") pursuant to the terms and conditions of Consulting Agreement
No. G12463P between the parties dated April 1, 1996. This Statement of Work may
be extended by Bell Atlantic for a period of up to one (1) year upon thirty (30)
days' written notice to Consultant.
DESCRIPTION OF SERVICES:
- ------------------------
1. APPLICATION INQUIRY/JOB OPPORTUNITY HOTLINE
A. Provide and maintain a toll-free, automated voice response system for
application inquiry, job opportunities within Bell Atlantic, test scheduling and
applicant status inquiry. This toll-free system must be accessible to all
external candidates in the Bell Atlantic- North footprint (NY Metro area, N.E.
area and Upstate NY area).
B. A separate line should be installed to administer to internal, Bell Atlantic
--------
applicants. This will be addressed under item 6, below.
C. The Voice Response System should be operating 7 days a week 24 hours per day.
D. First available test date should be no more than 1-2 weeks from call-in.
E. Vendor should provide Bell Atlantic with a Call "Drop" Analysis/Report.
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
2. RESUME COLLECTION AND RESPONSE
A. Become familiar with Bell Atlantic-identified Job Families for craft
positions.
B. Receive/collect all resumes/applications from all sources both solicited
and unsolicited.
C. Identify and code all resumes/applications by source code, if solicited,
according to Bell Atlantic protocols.
D. Receive/collect and respond to all referrals as determined by Bell
Atlantic.
E. Review/screen all resumes/applications for appropriate response and
respond to all applicants.
F. Respond to all inquiries regarding the application process. Solicited
resumes must be responded to within 5 business days, unsolicited
resumes/applications shall be responded to within two weeks of receipt.
G. Scan, or manually input all appropriate resumes and applicant information
into PeopleSoft by identifying the applicant's skills and affinity for
positions within Bell Atlantic. Utilize the Bell Atlantic guidelines.
H. Data shall be stored by using categories of experience, geographic
preference, job requirements, license requirements as required by Bell Atlantic.
I. Monitor pool status.
J. Build pools of applicants to meet on-going needs as identified by Bell
Atlantic.
K. Provide monthly reports on status of the applicant pools by geographic
area, by source, by EEO or as required by Bell Atlantic.
<PAGE>
Contract No.G12463P
Amendment No.06
Amended Statement Of Work
3. TEST ADMINISTRATION
All tests must be administered according to Bell Atlantic guidelines and Bell
Atlantic test-specific requirements. BELL ATLANTIC WILL CONTINUE TO INFORM
CONSULTANT OF ANY CHANGES, ADDITIONS OR ALTERATIONS TO THESE TESTS OR TESTING
PROTOCOLS, AND THE PARTIES WILL MODIFY THIS STATEMENT OF WORK AND RELATED
COMPENSATION AND PRICING SCHEDULES ACCORDINGLY AS THOSE CHANGES OCCUR.
A. Administer Tests.
B. Establish test schedules.
C. Identify test(s) required.
D. Enter test results and assessment data into PeopleSoft (input should be
same-day).
E. Scan or manually score test results.
F. Input manually scored tests into PeopleSoft.
G. Provide test feedback for all applicants/employees.
H. Advise qualified applicants/employees of the next step in the process.
I. Advise applicants/employees who did not qualify of the retesting policy.
J. Provide test security as required by Bell Atlantic.
K. Provide daily, weekly, monthly, quarterly reports as required by Bell
Atlantic.
Bell Atlantic Tests / Assessments include the following:
Technical Telephone Ability Battery ["Tech TAB"]: approximately 30 minutes in
- -------------------------------------------------
length, the Tech TAB involves number groups, problem identification and visual
scanning; Pass Rate: ****
Service Representative Telephone Ability Battery ["Rep TAB"]: approximately 30
- -------------------------------------------------------------
minutes in length, the Rep TAB involves number groups, problem identification
and visual scanning; Pass Rate: ****
Digital Cable Technology Minicourse ["DCT"]: approximately 4 hours in length,
- --------------------------------------------
the DCT involves an introduction to fiber optic transmission and digital
multiplexing, as well as basic electronics and circuit reading, acceptance
testing and troubleshooting procedures; Pass Rate: ****
Customer Contact Evaluation Revision ["CCE-R"]: approximately 1 hour, the CCE
- -----------------------------------------------
requires the candidate to play the role of a representative while an interviewer
plays the role of a customer; this telephonic role play comprises **** calls by
at least **** assessors: Pass Rate: ****
Keyboard Skills Test ["KST"]: approximately 30 minutes in length, the KST
- -----------------------------
measures the following competencies for Customer Service Representative
applicants: listening, memory, typing, multi-tasking, speed and accuracy:
Pass Rate: ****
Operator TAB: ****
Electronic System Minicourse (ESM-II): ****
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
--------------------------------
document has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
Consultant must be able to provide satellite services, when needed in any one of
the following locations:
New York City Boston, MA
White Plains Springfield, MA
Hempstead Portland, Maine
Albany Bangor, ME
Syracuse Burlington, VT.
Buffalo Pawtucket, RI.
Manchester, NH
Bell Atlantic will notify consultant if service is needed in other locations.
<PAGE>
Contact No. G12463P
Amendment No. 06
Amendment Statement Of Work
4. INTERVIEWING
The NON MANAGEMENT INTERVIEW ["NMI"] is approximately one hour in length and is
provided to candidates who have qualified on all applicable craft/associate
tests. The consultant will be required to perform the following services:
A. Establish interview schedules.
B. Schedule interview appointments.
C. Administer interviews.
D. Provide feedback to applicants.
E. Enter results into PeopleSoft.
F. Build pools of totally qualified candidates.
G. Determine if candidate is qualified for more than one position.
H. Provide salary range in accordance with Bell Atlantic pay grades and in
accordance with regional salary guidelines.
I. Provide applicant(s) with information regarding the next steps in the
process (qualified wait list).
5. DOCUMENTATION
All documentation shall be the sole property of Bell Atlantic.
Documentation shall be considered to include but not limited to:
A. Schedules
B. Test Rosters
C. Test Scores
D. Test Answer Sheets
E. Interview Notes
F. Reports
G. Protocols
H. Forms/written materials
I. Resumes
J. Applications
Consultant will also coordinate candidate processing directly with Bell
Atlantic's Background Investigator.
<PAGE>
Contract No. G12463P
Amendment No. 06
Amendment Statement Of Work
6. SPECIFIC PUBLISHED VACANCY/UPGRADE AND TRANSFER PLAN (UTP)/INTRADEPARTMENTAL
TRANSFER PLAN (ITP)
The Consultant will perform the following tasks telephonically as part of the
administration and processing of internal transfers/job applicants. Currently,
Bell Atlantic handles anywhere from **** incoming calls daily, with each call
lasting between ****.
A. Field incoming calls through a dedicated, regional 800 number. This will be
a separate 800# from that available to external candidates. This number is to
accommodate existing employees and must be available to employees in the NY
Metro. New England and Upstate NY areas.
B. Staff should be knowledgeable of all contracts in order to provide accurate,
regional information.
C. Perform applicable test scheduling, pre-test training scheduling (according
to Bell Atlantic protocols) and test administration
D. Input employees request into PeopleSoft*
E. Answer employees questions. Currently, there are 5 employees administering
this function for NY Metro based employees. Additionally, there is a
supervisor-level employee handling employee questions/issues that go beyond the
transactional nature of this function, i.e. contract specifics and necessary
dialog with supervisors.
F. Understand union contracts as they pertain to SPV/UTP/ITP
G. Calls should be handled "live"; voice mail response should be within one hour
H. Provide reports as requested by Bell Atlantic
I. Provide test date confirmation notices
J. Provide test results
K. Register UTP requests
L. Assure that each UTP candidate is test-qualified for each specific job, and
if not, proactively schedule the candidate for the proper tests.
* In order to access Bell Atlantic's PeopleSoft network, Consultant will need
the following:
1. A Pentium PC
2. A High-speed modem (28.8K or better)
3. 1 GB HD loaded for PeopleSoft Software (Bell Atlantic will install all
necessary software)
4. 82.35 access capability
5. Windows 95, tailored to 82.35 access
6. Security clearance for PeopleSoft
7. 3270 software mainframe capability (to renew password)
CONSULTANT WILL MAKE NECESSARY ACCOMMODATIONS FOR DIFFERENTLY ABLED CANDIDATES
AT ANY TEST SITE FROM WHICH IT OPERATES
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion
of the document has been filed separately with the
Securities and Exchange Commission.
6
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
7. PROGRAM EVALUATION
Bell Atlantic will perform regular service evaluations to ensure that project
goals and milestones are met. Consultant will provide regular, detailed reports,
both daily and cumulatively, and will ensure that reports match invoices.
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
8. COMPENSATION
1. EXTERNAL CANDIDATES
-------------------
<TABLE>
<CAPTION>
A. Position Test/Interview Fee Per Qualified
-------- --------------
Candidate
---------
<S> <C> <C>
Service Reps Rep TAB; CCE-R; KST; NMI ****
Technicians (NY) Tech TAB; DCT; NMI ****
Technicians (N.E) Tech TAB; NMI ****
Central Office Techs Tech TAB; ESM; NMI ****
Operators Operator TAB; OST; NMI ****
Maintenance Admin. MA mini-course; NMI ****
Clerical Staff Clerical TAB; NMI ****
</TABLE>
<TABLE>
<CAPTION>
B. Per Test Pricing Schedule Per Test Fee
------------------------- ------------
<S> <C>
Tech TAB ****
Rep TAB ****
Operator TAB ****
DCT ****
ESM ****
CCE-R ****
KST ****
NMI ****
</TABLE>
2. INTERNAL TRANSFERS/UPGRADES (pursuant to Section 6 of the Statement of Work)
---------------------------
A. Bell Atlantic will pay a flat annual fee of **** for the processing of
internal candidates. This fee will be billed in monthly installments of ****.
The base fee covers the staffing, management, administrative support,
scheduling, internal processing, quality control and other services associated
with the upgrade and transfer plan and the internal transfer plan and associated
administration of **** tests monthly of any type to internal candidates. Volumes
above **** tests will be billed according to the per-test fee schedule above.
B. In addition to the base fee. Bell Atlantic will pay an amount equal to the
direct cost associated with the Internal Voice Response system maintenance and
toll charges in support of UTP and ITP, plus **** of that amount as an
administration fee.
3. EXPENSE REIMBURSEMENT, IF ANY
-----------------------------
Travel, room charges for seminars, or related expenses (including, but not
limited to transportation and accommodations) shall not be incurred without the
prior written consent of Bell Atlantic. Any expense in the amount of $25.00 or
more must be accompanied by a receipt. Travel arrangements connected to this
project should be made through Bell Atlantic and must be in accordance with Bell
Atlantic Corporate Travel Guidelines.
4. PAYMENT TERMS: Bell Atlantic will pay a flat monthly minimum fee of ****.
------------- -------
This fee includes **** for the maintenance of the External hiring process,
including the staffing, management, administrative support, screening,
scheduling, processing, testing, interviewing and quality control associated
with the delivery of **** qualified candidates per month, and the **** for
the processing of Internal candidates.
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
--------------------------------
document has been filed separately with the Securities and
Exchange Commission.
<PAGE>
Contract No. G12463P
Amendment No. 06
Amended Statement Of Work
5. INVOICES TO: Copies to:
-----------
Bell Atlantic Bell Atlantic
1095 Avenue of the Americas, 240 E. 38th Street,
Room 501 15th Floor
New York, NY 10036 New York, NY 10016
Attn: Mr. Louis Leo Attn: Mr. Sean Mahoney
6. DESIGNATED BELL ATLANTIC REPRESENTATIVE
---------------------------------------
Jill Kastler
Director, Staffing Services
1095 Avenue of the Americas
New York, NY 10036
(212)395-5795
AGREED:
_____________________________________ _________________________________
Assessment Solutions, Incorporated. Telesector Resources Group, Inc.,
(a Bell Atlantic company)
By: /s/ Eli Salig By: /s/ Jill D. Kastler
------------------------------- ---------------------------
Name: ELI SALIG Name: JILL D. KASTLER
------------------------------- ---------------------------
Title: EXEC VP Title: DIRECTOR - STFG SVCS
------------------------------- ---------------------------
Date: 10-1-97 Date: 10/1/97
------------------------------- ---------------------------
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
BELL ATLANTIC
240 East 38th Street
New York, NY 10016
CONTRACT NO. G12463P [LOGO OF BELL ATLANTIC]
AMENDMENT NO. 07
ACCEPTANCE SHALL BE INDICATED BY
(1) SIGNING AND (2) RETURNING DUPLICATE TO:
------- -------------------
Assessment Solutions, Incorporated Telesector Resources Group, Inc.
780 Third Avenue 240 E. 38th Street, 15th Flr.
New York, NY 10017 New York, NY 10016
Attn: Mr. Eli Salig Attn: Mr. Sean M. Mahoney
SERVICE: Consulting Services (Employment/Staffing Assessment).
Telesector Resources Group, Inc., d/b/a Bell Atlantic Network Services
(hereinafter "Bell Atlantic") Agreement No. G12463P with you, dated April 1,
1996, is hereby modified by this Amendment No. 07 as follows:
THE SECTION MARKED "4. CANCELLATIONS; MODIFICATIONS" - SUBSECTION `a' - FIRST
SENTENCE IS HEREBY CHANGED TO READ:
"SERVICES MAY BE CANCELED BY THE MUTUAL CONSENT OF THE PARTIES UPON SIX MONTHS
PRIOR WRITTEN NOTICE"
SERVICES PROVIDED UNDER THIS AMENDMENT NO. 7 WILL BE IN ACCORDANCE WITH THE
"AMENDED STATEMENT OF WORK - BELL ATLANTIC `SOUTH'," ATTACHED HERETO AS EXHIBIT
B.
All other Terms and Conditions of the Agreement are reaffirmed and remain in
effect to the extent that they do not conflict with this Agreement.
(1) Sign Here and (2) Return To Address Above:
---- -----------------------
AGREED AND ACCEPTED:
ASSESSMENT SOLUTIONS INCORPORATED TELESECTOR RESOURCES GROUP, INC.
(A BELL ATLANTIC COMPANY)
By: /s/ Eli Salig By: /s/ L. Garrambone
------------------------------ -------------------------------
Name: Eli Salig Name: L. Garrambone
---------------------------- ------------------------------
Title: EVP Title: Vice President
--------------------------- -----------------------------
Date: 1-8-98 Date: 1/12/98
---------------------------- ------------------------------
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
EXHIBIT B
AMENDED STATEMENT OF WORK - BELL ATLANTIC "SOUTH"
This Amendment to the Statement of Work, entered into by Assessment Solutions,
Incorporated ("Consultant") and Telesector Resources Group, Inc. ("Bell
Atlantic") pursuant to the terms and conditions of Consulting Agreement No.
G12463P between the parties dated April 1, 1996. This Amended Statement of Work
may be extended by Bell Atlantic for a period of up to one (1) year upon thirty
(30) days' written notice to Consultant.
DESCRIPTION OF SERVICES:
- -----------------------
1. APPLICATION INQUIRY/JOB OPPORTUNITY HOTLINE
A. Provide and maintain a toll-free, automated voice response system for
application inquiry, job opportunities within Bell Atlantic, test scheduling and
applicant status inquiry. This toll-free system must be accessible to all
external candidates in the Bell Atlantic - South footprint (New Jersey,
Pennsylvania, Delaware, Maryland, Virginia, West Virginia and Washington, D.C.).
B. The Voice Response System comprises **** 800-numbers and **** and should
be operating 7 days a week, 24 hours per day.
C. First available test date should be no more than 1-2 weeks from call-in.
E. Consultant should provide Bell Atlantic with a Call "Drop" Analysis/Report.
F. Consultant will appropriately interface with the following Bell Atlantic -
South systems:
i) Applicant Candidate Tracker ("ACT") system for the purposes of feeding
internal and external candidate data to Bell Atlantic;
ii) TIDB and UTB Databases to transfer test scores and related
information; and
iii) Automated Candidate Entry ("ACE") system to receive data necessary to
schedule and test internal candidates.
G. Consultant will be responsible for system programming and maintenance, as
well as developing and updating IVR scripts and customizing system monitoring
software.
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
--------------------------------
has been filed separately with the Securities and Exchange Commission.
1
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
2. RESUME COLLECTION AND RESPONSE
A. Become familiar with Bell Atlantic-identified Job Families for associate
positions.
B. Receive/collect all resumes/applications from all sources both solicited
and unsolicited.
C. Identify and code all resumes/applications by source code, if solicited,
according to Bell Atlantic protocols.
D. Receive/collect and respond to all referrals as determined by Bell
Atlantic.
E. Review/screen all resumes/applications for appropriate response and respond
to all applicants.
F. Respond to all inquires regarding the application process. Solicited
resumes must be responded to within 5 BUSINESS DAYS, unsolicited
resumes/applications shall be responded to within TWO WEEKS of receipt.
G. Store all resumes and applicant information by categories of experience,
skills, affinity for positions, geographic preference and job requirements.
H. Monitor pool status.
I. Build pools of applicants to meet on-going needs as identified by Bell
Atlantic.
J. Provide monthly reports on status of the applicant pools by geographic
area, by source, by EEO or as required by Bell Atlantic.
2
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
3. TEST ADMINISTRATION
All tests must be administered according to Bell Atlantic guidelines and Bell
Atlantic test-specific requirements. BELL ATLANTIC WILL CONTINUE TO INFORM
CONSULTANT OF ANY CHANGES, ADDITIONS OR ALTERATIONS TO THESE TESTS OR TESTING
PROTOCOLS, AND THE PARTIES WILL MODIFY THIS STATEMENT OF WORK AND RELATED
COMPENSATION AND PRICING SCHEDULES ACCORDINGLY AS THOSE CHANGES OCCUR.
A. Administer Tests.
B. Establish test schedules.
C. Identify test(s) required.
D. Score tests electronically, manually or via scan (depending on the
particular test).
E. Enter test results and assessment data into TIDB and/or UTB databases.
F. Provide test feedback for all applicants/employees.
G. Advise qualified applicants/employees of the next step in the process.
H. Advise applicants/employees who did not qualify of the retesting policy.
I. Provide test security as required by Bell Atlantic.
J. Obtain Bell Atlantic job application from all applicants.
K. Obtain signed Background Verification Check form for all candidates.
L. Provide daily, weekly, monthly, quarterly reports as required by Bell
Atlantic.
M. BELL ATLANTIC "SOUTH" TESTS / ASSESSMENTS INCLUDE THE FOLLOWING (TIME LENGTH
----------------------------------------------------------------------------
INCLUDES PREPARATION & INSTRUCTION):
- ------------------------------------
Universal Test Battery ["UTB"]: **** in length; Pass Rate: ****
- -------------------------------
Automotive Mechanic Knowledge Test ["AMKT"]: **** in length; Pass Rate: ****
- --------------------------------------------
Business Management Abilities Test ["BMAT"]: **** in length; Pass Rate: ****
- --------------------------------------------
Building Maintenance Qualification Test ["BMQT"]: **** in length; Pass
- ------------------------------------------------- Rate: ****
Customer Administrator/Agent Mastery Test ["CAAMT"]: **** in length; Pass
- ---------------------------------------------------- Rate: ****
Customer Agent Mastery Test ["CAMT"]: **** in length; Pass Rate: ****
- -------------------------------------
Customer Assistance Role Play Test ["CART"]: **** in length; Pass Rate: ****
- --------------------------------------------
Digital Cable Technologies Minicourse ["DCTMC"]: **** in length; Pass
- ------------------------------------------------ Rate: ****
Electronic Systems Minicourse ["ESMC"]: **** in length; Pass Rate: ****
- ---------------------------------------
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
--------------------------------
document has been filed separately with the Securities and Exchange
Commission.
3
<PAGE>
Contract No. G12463P
Amendment No. 07
Amendment Statement Of Work
Facilities Assignment Control System Loop Assignment Center Minicourse ["FLMC"
- ------------------------------------------------------------------------------
or "FACS"] ****
- ----------
Instructor Assessment Process Work Sample ["IAPWS"]: **** in length;
- --------------------------------------------------- Pass Rate ****
Secretarial Basic Skills Test Battery ["SBST"]: **** in length; Pass Rate ****
- ----------------------------------------------
Special Service Center Minicourse ["SSCMC"]: **** in length; Pass Rate ****
- -------------------------------------------
Speed Typing Test ["STT"]: **** in length; Pass Rate ****
- -------------------------
SJI-M and SJI-G: TBD
- ---------------
Spanish Proficiency Interview ["SPI"]: TBD
- -------------------------------------
***
Consultant must be able to provide satellite services, when needed, in any one
of the following locations:
New Jersey Delaware
- ---------- --------
Collingswood Wilmington
East Brunswick Maryland
Newark --------
Pennsylvania Baltimore
- ------------ West Virginia
Altoona -------------
Harrisburg Charleston
Lancaster District of Columbia
Philadelphia --------------------
Pittsburgh Washington
Reading Virginia
Scranton --------
Wilkes Barre Falls Church
Norfolk
Richmond
Roanoke
Additionally, Consultant may be required to provide testing services in any of
the following "remote" locations:
New Jersey Delaware
- ---------- --------
Trenton Dover
Pennsylvania Maryland
- ------------ --------
Allentown Greenbelt
Scranton Hunt Valley
Williamsport Silver Spring
Virginia
- --------
Pulaski
Norton
Blacksburg
Bell Atlantic will notify consultant if service is needed in other locations.
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
--------------------------------
has been filed separately with the Securities and Exchange Commission.
4
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
4. INTERVIEWING
Several Interviews are conducted by either the prospective Bell Atlantic Hiring
Managers or by the dedicated Human Resources team in the respective Line of
Business. Consultant may be required to conduct the following Interviews at the
request of Bell Atlantic:
A. CCSI: Interview currently conducted by Bell Atlantic Manager for
Advertising Sales, Communications, Customer Sales and Public Communications
Sales Reps, as well as Directory Advertising Sales Canvassers.
Administration Time: Approximately 1 Hour.
B. CI: Interview currently conducted by hiring manager for Consumer Division
Consultants and Service Reps. Administration Time: Approximately 1 Hour.
5. DOCUMENTATION
All documentation shall be the sole property of Bell Atlantic.
Documentation shall be considered to include but not limited to:
A. Schedules
B. Test Rosters
C. Test Scores
D. Test Answer Sheets
E. Interview Notes, if applicable
F. Reports
G. Protocols
H. Forms/written materials
I. Resumes
J. Applications
K. Background Verification Check authorization forms
Consultant will also coordinate candidate processing directly with Bell
Atlantic's Background Investigator.
5
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
6. INTERNAL CANDIDATE SCHEDULING AND TESTING
Currently the Bell Atlantic - South Standing Request Database (internal
800-number IVR) accepts standing requests of candidates who self-nominate for
specific jobs. Additionally, internal candidates can be scheduled for various
tests unrelated to specific jobs.
The Consultant will perform the following tasks as part of the administration
and processing of INTERNAL applicants.
A. Interface with Automated Candidate Entry ("ACE") system to capture
necessary internal candidate information to assist in the scheduling and
administration of the appropriate UTB/TIDB tests.
B. Perform applicable test scheduling and administration.
C. Input/feed tests results into the appropriate TIDB and UTB databases.
D. Provide reports as requested by Bell Atlantic.
E. Provide test results.
CONSULTANT, IN CONJUNCTION WITH BELL ATLANTIC PERSONNEL ASSESSMENT & RESEARCH,
WILL MAKE NECESSARY ACCOMMODATIONS FOR DIFFERENTLY ABLED CANDIDATES AT ANY TEST
SITE FROM WHICH IT OPERATES.
7. PROGRAM EVALUATION
Bell Atlantic will perform regular service evaluations to ensure that project
goals and milestones are met. Consultant will provide regular, detailed reports,
both daily and cumulatively, and will ensure that reports match invoices.
Bell Atlantic will continue to inform Consultant of any changes, additions or
alterations to the tests or testing protocols, and the parties will modify this
Statement of Work and related compensation and pricing schedules accordingly as
those changes occur.
6
<PAGE>
Contract No. G12463P
Amendment NO. 07
Amended Statement Of Work
8. COMPENSATION
1. PER QUALIFIED CANDIDATE
-----------------------
A. By Position
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Fee Per Qualified
- --------------------------------------------------------------------------------------------
JOB TITLE TEST/INTERVIEW REQUIREMENTS Candidate
- --------------------------------------------------------------------------------------------
<S> <C> <C>
GROUP A
- -------
Carrier Call Representative All Positions Require UTB Only ****
Cashier
Operator
Teller
Collector/Collection Rep
Sales Rep
Apprentice Tech
Assistant Tech
Communication Tech
Facilities Tech
Frame Attendant
Outside Plant Tech
Services Tech
Splicing Tech Helper
Material Service Coordinator
Computer Attendant
Customer Service Clerk
Data Base Analyst
Dial Administration Clerk
Directory Compilation Clerk
Dispatching Clerk
Field Clerk
Force Clerk
Force Administration Clerk
General Clerk
General Clerk Operations
General Field Clerk
Graphics Illustrator
Key Data Entry Clerk
Management Plan Clerk
Manager's Clerk
Message Investigation Center Clerk
Network Services Coordinator
Office Clerical Assistant
Office Clerk
Operations Clerk
Plant Assignment Clerk
Plant records Clerk
RCMAC clerk
Records Clerk
Remittance Clerk
Senior Clerk
- --------------------------------------------------------------------------------------------
</TABLE>
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the
--------------------------------
document has been filed separately with the Securities and
Exchange Commission.
7
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
Senior Field Clerk (not MCT)
Senior Service Analyst
Senior Traffic Office Clerk
Service Analyst
Service Center Clerk
Service Order Administrator
Service Order Clerk
Service Order Correction Clerk
Special Clerk (not CPC)
Staff Clerk
Stenographer
Stenographer Clerk
Support Systems Attendant
Translation Administrator
Coin Box Collector
Coin Telephone Collector
Driver - Heavy Truck
Driver - Light Truck
Driver - Medium Truck
Driver - Tractor Trailer
Materials Handler
Materials Service Attendant
Storekeeper
Supplies Attendant
Warehouse Attendant
Repair Clerk
Repair Service Attendant
Senior Field Clerk (not MCT)
Checker and Architectural Drafter
Conduit Inspector
Drafter
Engineering Drawing Clerk
Special Clerk (CPC)
Building Mechanic
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROUP B
-------
Service Rep UTB, CART-C, CI ****
Consultant UTB, CART-C, CI
Maintenance Administrator UTB, CART-M
Repair Service Clerk UTB, CART-M
Communications Rep UTB, SJI, CCSI
Customer Sales Rep UTB, SJI, CCSI
Assignment Tech UTB,
Auto Mechanic UTB, AMKT
PubComm Sales Rep UTB, SJI, CCSI
Building Equipment Mechanic UTB, BMQT
Automotive Equipment Mechanic UTB, AMKT
Master Buildings Equipment Mechanic UTB, BMQT
Administrative Rep UTB, STT (where appropriate)
Typist UTB, STT
- --------------------------------------------------------------------------------
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of
--------------------------------
the document has been filed separately with the Securities
and Exchange Commission.
8
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROUP C
- -------
Engineering Assistant UTB, ESM ****
Customer Service Admin UTB, CAAMT, CART-M
Assignment Administrator UTB, FLMC
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROUP D
- -------
Cable Splice Tech UTB, DTCMC ****
Central Office Tech UTB, ESMC or SSCMC
Splicing Tech UTB, DCTMC
Systems Tech UTB, ESMC
Network Tech UTB, ESMC
Switching Equip Tech (SET) UTB, ESMC or SSCMC
Customer Service Agent UTB, CAAMT, CAMT, CART-M
Systems Tech OP UTB, ESMC
Systems Tech - Radio UTB, ESMC
- --------------------------------------------------------------------------------
***
B. Per Test Pricing Schedule Per Test Fee
------------------------- ------------
UTB ****
AMKT ****
BMQT ****
CAAMT ****
CAM ****
CART-C ****
CART-M ****
DCTMC ****
ESM ****
FLMC ****
IAPWS ****
SBST ****
SSCMC ****
* Bell Atlantic is seeking to eliminate the CART Tests during 1998; Consultant
and Bell Atlantic will agree upon the fees for a replacement test, as well as
any impact on the applicable "Per-Qualified Candidate" fee when that replacement
is determined by Bell Atlantic.
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
--------------------------------
has been filed separately with the Securities and Exchange Commission.
9
<PAGE>
Contract No. G12463P
Amendment No. 07
Amended Statement Of Work
2. EXPENSE REIMBURSEMENT, IF ANY
-----------------------------
Travel, room charges for seminars, or related expenses (including, but not
limited to transportation and accommodations) shall not be incurred without the
prior written consent of Bell Atlantic. Any expense in the amount of $25.00 or
more must be accompanied by a receipt. Travel arrangements connected to this
project should be made through Bell Atlantic and must be in accordance with Bell
Atlantic Corporate Travel Guidelines.
3. PAYMENT TERMS: Bell Atlantic will pay a flat monthly minimum fee of ****.
------------- -------
This fee accounts for the maintenance of the hiring process, including the
staffing, management, administrative support, screening, scheduling, processing,
testing, interviewing and quality control associated with the delivery of 1,018
qualified candidates per month. Consultant will provide the necessary equipment,
including personal computers, related hardware and software, and facsimile
machines, to facilitate Bell Atlantic's staffing process.
4. INVOICES TO: Copies to:
-----------
Bell Atlantic Bell Atlantic
1310 North Courthouse Road, 4th Floor 240 E. 38th Street, 15th Floor
Arlington, VA 22201 New York, NY 10016
Attn: Ms. Connie Mueller Attn: Mr. Sean Mahoney
5. DESIGNATED BELL ATLANTIC REPRESENTATIVE
---------------------------------------
Jill Kastler
Director, Staffing Services
1095 Avenue of the Americas
New York, NY 10036
(212) 395-5795
AGREED:
_____________________________________ ___________________________________
Assessment Solutions, Incorporated. Telesector Resources Group, Inc.,
(a Bell Atlantic company)
By: /s/ Eli Salig By: /s/ Jill D. Kastler
----------------------------- ---------------------------
Name: Eli Salig Name: Jill D. Kastler
----------------------------- ---------------------------
Title: EVP Title: Dir - Staffing Services
----------------------------- ---------------------------
Date: 1/9/98 Date: 1/7/98
----------------------------- ---------------------------
**** CONFIDENTIAL TREATMENT REQUESTED: A copy of this portion of the document
--------------------------------
has been filed separately with the Securities and Exchange Commission.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 2,883,155 146,099
<SECURITIES> 0 0
<RECEIVABLES> 6,859,195 3,361,392
<ALLOWANCES> 52,413 24,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,964,504 3,639,876
<PP&E> 7,052,956 2,939,904
<DEPRECIATION> 1,834,670 1,176,656
<TOTAL-ASSETS> 40,113,545 7,076,654
<CURRENT-LIABILITIES> 7,410,615 3,016,239
<BONDS> 0 0
0 0
0 0
<COMMON> 65,123 46,252
<OTHER-SE> 14,739,954 3,541,788
<TOTAL-LIABILITY-AND-EQUITY> 40,113,545 7,076,654
<SALES> 21,990,577 12,858,779
<TOTAL-REVENUES> 21,990,577 12,858,779
<CGS> 11,291,997 5,905,213
<TOTAL-COSTS> 19,678,324 10,208,866
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 38,000 0
<INTEREST-EXPENSE> 313,215 36,668
<INCOME-PRETAX> 2,189,796 2,636,648
<INCOME-TAX> 944,676 1,444,836
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,245,120 1,191,812
<EPS-PRIMARY> .20 .26
<EPS-DILUTED> .19 .26
</TABLE>
