<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission File No. 0-22195
AHL SERVICES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-2277249
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3353 Peachtree Road, NE, Atlanta, GA 30326
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (404) 267-2222
------------------
Not Applicable
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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:
17,385,442 shares on May 7, 1999.
<PAGE> 2
AHL SERVICES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 1999 (Unaudited) and December 31, 1998 1
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
ITEM 3. Quantitative and Qualitative Disclosures 8
About Market Risk
PART II OTHER INFORMATION AND SIGNATURE
ITEM 6. Exhibits and Reports on Form 8-K 8
SIGNATURE 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
AHL SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1999 1998
---------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,957 $ 18,239
Accounts receivable, less allowance for doubtful accounts
of $2,057 and $1,952 in 1999 and 1998, respectively 125,517 108,857
Reimbursable customer expenses 5,197 4,184
Work-in-process 7,074 4,711
Uniforms in service, net 2,736 2,457
Prepaid expenses and other 6,303 6,086
Deferred income taxes 487 563
--------- ---------
Total current assets 164,271 145,097
Property and equipment, net 26,010 24,572
Intangibles, net 199,491 195,113
Other assets 810 1,051
--------- ---------
$ 390,582 $ 365,833
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,412 $ 16,159
Accrued payroll and other current liabilities 53,255 58,654
Current portion of self-insurance reserves 1,055 980
Income taxes payable 3,765 3,046
Current portion of long-term debt 330 388
Customer deposits 6,384 5,287
--------- ---------
Total current liabilities 86,201 84,514
--------- ---------
Long-term debt, less current portion 93,737 169,338
--------- ---------
Self-insurance reserves, less current portion 4,220 3,920
--------- ---------
Deferred income taxes 1,447 1,139
--------- ---------
Other non-current liabilities 990 1,234
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock of AHL Services, Inc., $.01 par value; 50,000,000 shares
authorized, 17,381,692 and 14,119,922 shares issued and outstanding 174 142
Preferred stock of AHL Services, Inc., no par value; 5,000,000 shares
authorized, no shares outstanding -- --
Foreign currency translation adjustment (1,253) 26
Paid-in capital 176,642 80,827
Retained earnings 28,424 24,693
--------- ---------
Total Shareholders' equity 203,987 105,688
--------- ---------
$ 390,582 $ 365,833
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
<PAGE> 4
AHL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
-------- --------
<S> <C> <C>
Revenues $170,638 $ 84,500
Cost of services 119,728 62,842
-------- --------
Gross Margin 50,910 21,658
Operating expenses:
Field operating 33,751 12,902
Corporate, general and administrative 5,139 4,311
Depreciation and amortization 4,003 1,656
-------- --------
Operating income 8,017 2,789
Interest expense 2,126 37
Other income, net (30) (282)
-------- --------
Income before income taxes 5,921 3,034
Income tax provision 2,190 1,210
-------- --------
Net income $ 3,731 $ 1,824
======== ========
Earnings per share:
Net income per common and common equivalent share:
Basic: $ 0.23 $ 0.13
======== ========
Diluted: $ 0.22 $ 0.13
======== ========
Weighted average common and common equivalent shares:
Basic 16,475 13,605
======== ========
Diluted 17,102 14,107
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 5
AHL SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,731 $ 1,824
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 4,003 1,656
Gain on sales of property and equipment -- (225)
Changes in current assets and liabilities, net of assets of acquired
businesses (18,743) (1,224)
--------- ---------
Net cash (used in) provided by operating activities (11,009) 2,031
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (10,479) (13,311)
Purchases of property and equipment (3,207) (2,134)
Proceeds from sales of property and equipment -- 1,579
Other activities, net (660) (257)
--------- ---------
Net cash used in investing activities (14,346) (14,123)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of credit facility (119,800) (10,790)
Borrowings under credit facility 59,273 17,387
Repayment of subordinated convertible debenture (10,000) --
Proceeds from exercise of stock options 62 --
Net proceeds from follow-on offering 96,171 --
Other (383) --
--------- ---------
Net cash provided by financing activities 25,323 6,597
--------- ---------
Effect of exchange rates on cash and cash equivalents (1,250) 75
--------- ---------
Net change in cash and cash equivalents (1,282) (5,420)
Cash and cash equivalents at beginning of period 18,239 15,456
--------- ---------
Cash and cash equivalents at end of period $ 16,957 $ 10,036
========= =========
CASH PAID DURING THE PERIOD FOR:
Interest $ 2,626 $ 17
========= =========
Income taxes $ 1,471 $ 623
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 6
AHL SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. SUMMARY OF PRESENTATION - The condensed consolidated financial
statements included herein have been prepared by AHL Services, Inc.
("AHL" or the "Company), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information not misleading. In the opinion of
management, the condensed consolidated financial statements contain all
adjustments necessary to present fairly the financial position of the
Company as of March 31, 1999, the results of its operations and its
cash flows for the three months ended March 31, 1999 and 1998. All such
adjustments are of a normal recurring nature. The results of operations
for the three months ended March 31, 1999 are not necessarily
indicative of the results to be expected for the year ended December
31, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended December 31, 1998
included in the Company's annual report on Form 10-K for such period.
2. ACQUISITION - On December 28, 1998, the Company acquired
Unicco Security Services, Inc. ("Unicco"), a subsidiary of USC, Inc.,
for $12 million in cash. Unicco is an access control and security
services company operating under long-term contracts with clients with
a geographic focus primarily in the northeastern United States and
Chicago. Unicco had annual revenues of more than $50 million in 1998.
The results of operations of this acquisition have been included in the
attached condensed consolidated financial statements included herein
since the date of acquisition. This acquisition was accounted for using
the purchase method of accounting. As a result, the purchase price has
been allocated to the assets acquired, including intangibles, based on
their respective fair values. The purchase price allocation is
preliminary and subject to adjustment.
3. ANNOUNCED ACQUISITIONS SUBSEQUENT TO MARCH 31, 1999 - On April 30,
1999, the Company acquired Professional Inventory Management and
Merchandising Services Corporation ("PIMMS") for $65 million in cash
plus potential contingent consideration. PIMMS is headquartered in
Minneapolis and provides outsourced in-market merchandising services to
major consumer product manufacturers and large retail chains. PIMMS had
annual revenues of over $40 million in 1998.
Also on April 30, 1999, AHL acquired MM Zeitarbeit GmbH ("MM") a German
operational support staffing services provider for $1.75 million in
cash. MM provides outsourced light industrial services in the Bavaria
region of Germany, operating within the same geographic region as TUJA,
a light industrial services company acquired by AHL during 1998.
Combined with the TUJA operations, MM creates greater density for AHL
within the Bavaria region, and creates a broader base of clients for
future growth. MM's 1998 revenues were approximately $3.3 million.
4. BUSINESS SEGMENT INFORMATION - The following table presents information
regarding the Company's operating segments for the first quarter of
1999 and 1998:
<TABLE>
<CAPTION>
(In thousands) Three months ended March 31:
----------------------------
Operating
Revenues Income
-------- --------
<S> <C> <C>
1999
Aviation services $46,990 $ 3,048
Facility support services 56,382 3,748
Operational support
staffing services 38,796 3,410
Marketing execution and
fulfillment services 28,470 2,950
Corporate and other -- (5,139)
-------- --------
$170,638 $ 8,017
======== ========
1998
Aviation services $ 41,465 $ 3,395
Facility support services 32,526 2,833
Operational support
staffing services 7,254 289
Marketing execution and
fulfillment services 3,255 583
Corporate and other -- (4,311)
-------- --------
$ 84,500 $ 2,789
======== ========
</TABLE>
5. COMPREHENSIVE INCOME - Other comprehensive income (loss) for the first
quarter of 1999 and 1998 includes only foreign currency translation
adjustments. The calculation of other comprehensive income (loss) is
as follows:
<TABLE>
<CAPTION>
(in thousands)
THREE MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
-------- --------
<S> <C> <C>
Net income $ 3,731 $ 1,824
Other comprehensive
income (loss) (1,279) 176
-------- --------
Comprehensive income $ 2,452 $ 2,000
======== ========
</TABLE>
4
<PAGE> 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results - Three Months Ended March 31, 1999 and 1998
Revenues increased $86.1 million, or 102%, to $170.6 million in the
first quarter of 1999 from $84.5 million in the first quarter of 1998.
Of the revenues for the first quarter of 1999, approximately $66.4
million was attributable to the acquisitions owned less than one year.
The remaining increase was a result of providing additional services
to existing clients, entering into contracts to provide services to
new clients and rate increases on existing contracts.
Cost of services represents the direct costs attributable to a
specific contract, predominantly wages and related benefits, as well
as certain related expenses such as workers' compensation and other
direct labor related expenses. Cost of services increased $56.9
million, or 91%, to $119.7 million in the first quarter of 1999 from
$62.8 million in the first quarter of 1998. As a percentage of
revenues, cost of services decreased to 70.2% in the first quarter of
1999 from 74.4% in the first quarter of 1998. This decrease was
primarily due to the effect of the growth in revenues of the Company's
higher margin marketing execution and fulfillment services businesses.
Gross margin increased $29.3 million, or 135%, to $50.9 million in the
first quarter of 1999 from $21.7 million in the first quarter of 1998.
As a percentage of revenues, gross margin improved to 29.8% in the
first quarter of 1999 from 25.6% in the first quarter of 1998.
Field operating expenses represent expenses which directly support
field operations, such as each district's management, facility expenses
(such as rent, communication costs and taxes), employee uniforms,
equipment leasing, maintenance, local sales and marketing activities.
These expenses increased $20.9 million, or 162%, to $33.8 million in
the first quarter of 1999 from $12.9 million in the first quarter of
1998. As a percentage of revenues, field operating expenses increased
to 19.8% in the first quarter of 1999 from 15.3% in the first quarter
of 1998. This percentage increase was primarily attributable to the
facility expenses of Gage Marketing Support Services Group, an
acquisition in July, 1998 which operates in the Company's marketing
execution and fulfillment services business.
Corporate general and administrative expenses, which includes the cost
of services the Company provides to support and manage its field
activities, increased $828,000, or 19%, to $5.1 million in the first
quarter of 1999 from $4.3 million in the first quarter of 1998. As a
percentage of revenues, these expenses decreased to 3.0% in the first
quarter of 1999 from 5.1% in the first quarter of 1998. This
percentage decrease was primarily due to better leveraging of
corporate personnel.
Depreciation and amortization increased $2.3 million or 142%, to $4.0
million in the first quarter of 1999 from $1.7 million in the first
quarter of 1998. As a percentage of revenues, these expenses increased
to 2.3% in the first quarter of 1999 from 2.0% in the first quarter of
1998. The increase was primarily due to the depreciation and
amortization expense of acquisition related fixed and intangible
assets.
Operating income increased $5.2 million, or 188%, to $8.0 million in
the first quarter of 1999 from $2.8 million in the first quarter of
1998. As a percentage of revenues, operating income improved to 4.7%
in the first quarter of 1999 from 3.3% in the first quarter of 1998.
Interest expense increased to $2.1 million in the first quarter of 1999
from $37,000 in the first quarter of 1998. Interest expense increased
in 1999 due to the use of the Company's credit facility to fund
acquisitions.
Income tax provision increased $1.0 million or 81%, to $2.2 million in
the first quarter of 1999 from $1.2 million in the first quarter of
1998. The Company provided income taxes at a rate of 37.0% in 1999 and
39.9% in 1998. The decrease in the first quarter of 1999 is due to the
change in business mix by country as a result of the acquisitions made
after the first quarter of 1998.
5
<PAGE> 8
Net income increased $1.9 million, or 105%, to $3.7 million, or 2.2%
of revenues, in the first quarter of 1999 from net income of $1.8
million, or 2.2% of revenues, in the first quarter of 1998.
Liquidity and Capital Resources - Cash used in operating
activities was $11.0 million for the first quarter of 1999 compared to
cash provided by operating activities of $2.0 million for the first
quarter of 1998. This decrease in cash from operating activities was
primarily the result of an increase of $4.3 million in net income
before depreciation and amortization offset by $17.5 million of changes
in working capital due to increases in accounts receivable as a result
of the Company's acquisitions, the growth in revenues and the timing of
payments of accounts payable and accrued expenses. Cash used in
investing activities for the first quarter of 1999 was $14.3 million
compared to $14.1 million for the first quarter of 1998. The use of
cash for investing activities was principally as a result of the
acquisitions made in the first quarter of 1999 and 1998. Cash provided
by financing activities for the first quarter of 1999 was $25.3 million
compared to $6.6 million for the first quarter of 1998. In January
1999, the Company completed a follow-on public offering of its common
stock. The Company issued 3,255,570 shares at an offering price of $31
per share. The total proceeds, net of underwriting discounts and
offering expenses, were approximately $96.1 million, of which the
Company used a portion to repay a $10 million subordinated
convertible debenture. The remaining $86.1 million was used to reduce
the outstanding balance under the credit facility.
Capital expenditures were approximately $3.2 million for the first
quarter of 1999 compared to $2.1 million for the first quarter of 1998.
Historically, capital expenditures have been, and future expenditures
are anticipated to be, primarily to support expansion of the Company's
operations, including equipment and management information systems.
Effective April 23, 1999, the Company expanded its credit facility to
$250 million with a syndicate of banks led by First Union National
Bank. The Company plans to utilize the facility to grow its business
through strategic acquisitions. At March 31, 1999, taking into account
the expansion of the credit facility, there was approximately $155
million of availability remaining under the credit facility.
The Company believes that funds generated from operations, together
with existing cash and borrowings under the credit facility, will be
sufficient to finance its current operations, planned capital
expenditures and internal growth for at least the next several years.
If the Company were to make a significant acquisition or series of
acquisitions for cash it may be necessary for the Company to obtain
additional debt or equity financing.
6
<PAGE> 9
FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral
statements made by or on behalf of the Company, may constitute "forward-looking
statements" within the meaning of the federal securities laws. When used in this
report, the words "believes," "expects," "estimates" and similar expressions are
intended to identify forward-looking statements. Statements regarding future
events and developments and the Company's future performance, as well as our
expectations, beliefs, plans, estimates or projections relating to the future,
are forward-looking statements within the meaning of these laws. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. Such risks
and uncertainties include, among others, conditions affecting our reliance on
major clients; our ability to manage a growing business; the availability of
labor; conditions affecting our international operations; the impact of
competition; general economic conditions; the Year 2000 issue and changes in
foreign currency and interest rates. Management believes that these
forward-looking statements are reasonable; however, you should not place undue
reliance on such statements. These statements are based on current expectations
and speak only as of the date of such statements. The Company undertakes no
obligation to publicly update or revise any forward-looking statement, whether
as a result of future events, new information or otherwise. Additional
information concerning the risks and uncertainties listed above, and other
factors that you may wish to consider, is contained in the Company's filings
with the Securities and Exchange Commission, including the Company's Annual
Report on Form 10-K. Copies of these filings are available from the Company free
of charge.
YEAR 2000 ISSUE
The Company is currently in the process of addressing the Year 2000
issue, which is the result of computer programs being written using two digits
rather than four to define the applicable year. As a result, computer
applications and software may recognize an input of two zeros (00) as the year
1900. This incorrect date recognition could cause systems and software
malfunctions that may have a material adverse effect on business operations.
This potential problem could affect not only the Company's internal information
systems but also those of third parties, such as clients and vendors using
information systems that may interact with or affect the Company's operations.
Company's Readiness-To ensure minimal business interruption due to
computer failures, the Company has performed a review of various software
applications and computer infrastructure that are likely to be affected by the
Year 2000 issue. Both "IT systems" and "non-IT systems" were reviewed. IT
systems refer to all pre-packaged and internally developed software applications
and programs and related computer hardware. Non-IT systems refer to various
equipment and devices that have "embedded" computer language, examples of which
are computer integrated circuits ("chips") and telephone switches. The review
was completed using the Company's employees and various computer consulting
vendors.
The Company's response is being conducted in phases. First, all
relevant computer systems were assessed as to functionality and to determine
Year 2000 compliance. Second, for those systems and software found to be
non-compliant or in need of upgrading, corrective steps are being and will be
taken. Corrective steps primarily relate to development and purchasing of
system software and hardware. Finally, all systems will be tested and then
implemented at necessary levels. The Company has substantially completed the
corrective phase and is transitioning into the testing and implementation
phase. The Company's objectives are to complete substantially all remediation
and replacement of internal information systems by August 1999, and to complete
final testing and certification for Year 2000 readiness by October 1999.
The Company presently believes that, with planned conversions to new
software, the Year 2000 issue will not pose significant operational problems
for its computer systems.
The Company has identified its significant clients and vendors that it
believes, at this time, to be critical to the Company's business operations, and
steps are underway to ascertain their respective stages of readiness through the
use of questionnaires, interviews, and other available means to determine the
progress that those clients and vendors are making in remediating their own Year
2000 issues. The Company is requiring that significant clients and vendors
certify those products and services to be Year 2000 compliant. However, there
can be no assurance that the information systems provided by or utilized by
other companies which affect the Company's operations will be timely revised in
such a way as to allow them to continue normal business operations or furnish
products, services or data to the Company without disruption.
Cost of Compliance - The Company is replacing its non-compliant
systems. Preliminary estimates for these new systems are in the range of $2.0 to
$3.0 million. To date, the Company has incurred capital expenditures of
approximately $1.5 million. The Company's Year 2000 project costs are not
expected to have a material impact on its results of operation or financial
condition.
Company Risk and Contingency Plans - The Company's systems identified
as non-compliant or in need of replacement are being replaced. The Company
expects these replacements to be substantially completed by year-end 1999. If
needed conversions to the Company's information systems are not made on a timely
basis or the Company's significant clients or vendors fail to make such
remediations and conversions on a timely basis, it could have a material adverse
effect on the Company's results of operation or financial condition.
7
<PAGE> 10
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Foreign Currency Risk - A substantial amount of the Company's revenues
are received, and operating costs are incurred, in foreign currencies (primarily
the British pound and the German deutsche mark), with a significant amount of
operating income being derived from operations in the United Kingdom and
Germany. The denomination of foreign subsidiaries' account balances in their
local currency exposes the Company to certain foreign exchange rate risks. The
Company addresses the exposure by financing most working capital needs in the
applicable foreign currencies. The Company does not engage in hedging
transactions to reduce exposure to fluctuations in foreign currency exchange
rates. Historically, the impact of foreign currency fluctuations on the Company
has been insignificant.
Interest Rate Risk - The Company maintains a Credit Facility, an
interest rate swap agreement and other long-term debt which subjects the
Company to the risk of loss associated with movements in market interest rates.
The Company's five-year Credit Facility had a balance outstanding at March 31,
1999 of $94.9 million, which was at a variable rate of interest. In order to
hedge against increasing interest rates, effective October 6, 1998, the Company
entered into a four-year interest rate swap agreement with a notional amount of
approximately $30.0 million to offset a portion of the floating interest rate
risk. The fair value of the swap agreement at March 31, 1999 approximates the
value when entered into in October 1998. Thus, if the Company were to unwind the
swap agreement, no material gain or loss would be recognized. A change in the
prevailing interest rates of 10% would result in a change in the total fair
value of long-term debt of approximately $1.8 million. Fair values were
determined from discounted cash flows.
PART II - OTHER INFORMATION AND SIGNATURE
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.1 Fourth Amendment to Amended and Restated
Credit Agreement
11 Computation of Earnings Per Share
27 Financial Data Schedule (For SEC Filing
Purposes Only)
</TABLE>
(b) Reports on Form 8-K:
None
8
<PAGE> 11
SIGNATURE
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.
AHL SERVICES, INC.
(REGISTRANT)
Date: May 14, 1999 By: /s/ David L. Gamsey
--------------------------------
David L. Gamsey
Vice President and Chief Financial Officer
(On behalf of the Registrant and as Chief
Accounting Officer)
9
<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
This FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Agreement"), is dated as of April 23, 1999, by and among AHL SERVICES, INC.
("AHL"), certain other Subsidiaries of AHL identified on the signature pages
hereto (together with AHL, sometimes individually referred to as a "Borrower"
and collectively are referred to as the "Borrowers"), Salomon Brothers Holding
Company Inc. ("New Lender"), and First Union National Bank, a national banking
association ("First Union"), as a Lender and as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
RECITALS
WHEREAS, First Union, First Union National Bank, London Branch,
Wachovia Bank, N.A., SunTrust Bank, Atlanta, NationsBank, N.A., Dresdner Bank
AG, New York and Grand Cayman Branches, Fleet National Bank, DG Bank Deutsche
Genossenschaftsbank Ag Cayman Island Branch, The Bank of Nova Scotia, and
ScotiaBank Europe plc (such Lenders are referred to herein collectively as the
"Existing Lenders"), the Administrative Agent and the Borrowers are parties to
that certain Amended and Restated Credit Agreement dated as of February 10,
1998, as amended (as so amended, the "Existing Credit Agreement"; and as amended
by this Agreement, the "Amended Credit Agreement"; capitalized terms used herein
and not otherwise defined herein shall have the meanings ascribed to them in the
Existing Credit Agreement); and
WHEREAS, the Borrowers, New Lender and First Union, as a Lender and as
Administrative Agent, desire to enter into this Agreement to, among other
things: (i) amend the Existing Credit Agreement to, subject to certain terms and
conditions contained herein, increase the Aggregate Commitment from Two Hundred
Ten Million Dollars ($210,000,000) to Two Hundred Fifty Million Dollars
($250,000,000) and (ii) add the New Lender as a Lender under the Amended Credit
Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
covenants and provisions herein contained and for TEN DOLLARS ($10.00) and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO EXISTING CREDIT AGREEMENT
Subject to the satisfaction of the conditions precedent set forth in
Section 3 of this Agreement, the Borrowers, the Lender and First Union, as a
Lender and as Administrative Agent, hereby agree that the Existing Credit
Agreement be, and it hereby is, amended as follows:
1.1 General. Upon and after the date hereof, all references to the
Existing Credit Agreement in that document or in any other Loan Document shall
mean the Existing Credit Agreement as amended hereby. Except as expressly
provided herein, the execution and delivery of this Agreement does not and will
not amend, modify or supplement any provision of,
<PAGE> 2
or constitute a consent to or a waiver of any noncompliance with the provisions
of, the Existing Credit Agreement, and, except as specifically provided in this
Agreement, the Existing Credit Agreement shall remain in full force and effect
and is hereby ratified and confirmed.
1.2 Amendment to Section 1.1. Section 1.1 of the Existing Credit
Agreement is further amended by amending and restating the following defined
term to read in its entirety as follows:
"Aggregate Commitment" means Two Hundred Fifty Million Dollars
($250,000,000).
1.3 Amendments to Schedule 1.1. Schedule 1.1 to the Existing Credit
Agreement is hereby amended and restated in its entirety as set forth on Exhibit
A attached hereto and made a part hereof.
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to the Lenders as follows:
2.1 Authorization of Amendment, Etc. The Borrower has the right and
power, and has taken all necessary action to authorize it, to execute, deliver
and perform this Agreement in accordance with its terms. This Agreement has been
duly executed and delivered by the Borrower and is a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms.
2.2 Compliance of Amendment with Laws, Etc. The execution, delivery and
performance of this Agreement in accordance with its terms do not and will not,
by the passage of time, the giving of notice or otherwise,
(1) require any governmental approval or violate any
applicable law relating to the Borrower;
(2) conflict with, result in a breach of or constitute a
default under the articles or certificate of incorporation or bylaws of
the Borrower, any material provisions of any indenture, agreement or
other instrument to which the Borrower is a party or by which the
Borrower or any of its properties may be bound or any governmental
approval relating to the Borrower, or
(3) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter
acquired by the Borrower.
2.3 Representations in Credit Agreement. Immediately prior to the
effectiveness of this Agreement, all of the representations set forth in the
Existing Credit Agreement were accurate in all material respects as of the date
hereof, except to the extent that
<PAGE> 3
such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall have been true and correct
on and as of such date. After giving effect to this Agreement, all of the
representations and warranties set forth in the Amended Credit Agreement, will
be accurate in all material respects as of the date hereof, except to the extent
that such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall have been true and correct
on and as of such date.
SECTION 3. CONDITIONS TO EFFECTIVENESS
The effectiveness of this Agreement and each of the amendments set
forth in Section 1 hereof is subject to the satisfaction in full of each of the
following conditions precedent:
3.1 Executed Loan Documents. This Agreement shall have been duly
authorized and executed by the parties hereto in form and substance satisfactory
to the Administrative Agent, shall be in full force and effect and no default
shall exist thereunder, and the Borrowers and New Lender shall have delivered
original counterparts thereof to the Administrative Agent.
3.2 Delivery of New Note. The Borrowers shall have duly executed and
delivered a new Revolving Notes, dated the date hereof, to New Lender, in form
and substance satisfactory to the Administrative Agent and New Lender.
SECTION 4. ADDITION OF LENDER
New Lender: (a) confirms that it has received from the Borrowers a copy
of the Existing Credit Agreement, together with copies of the most recent
financial statements and projections of the Borrowers delivered pursuant to
Section 6.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Agreement and become a party to the Amended Credit Agreement as a Lender; (b)
agrees that it will, independently and without reliance upon any other Lender or
the Administrative Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Amended Credit Agreement; (c) appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Amended Credit Agreement and the other
Loan Documents as are delegated to such Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; and (d)
agrees that, as of the effective date of this Agreement and without any further
action, it will become a Lender party to the Amended Credit Agreement and will
perform in accordance with their terms all the obligations which by the terms of
the Amended Credit Agreement and the other Loan Documents are required to be
performed by it as a Lender. The Borrowers and Lenders agree that the address
for New Lender for purposes of receiving notice and other communications under
the Amended Credit Agreement shall be as set forth on the signature pages hereto
opposite the name of New Lender.
<PAGE> 4
SECTION 5. MISCELLANEOUS
5.1 Counterparts. This Agreement may be executed by each party to this
Agreement upon a separate copy, and in such case one counterpart of this
Agreement shall consist of enough of such copies to reflect the signature of all
of the parties to this Agreement. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such counterparts.
5.2 Section References. The references in this Agreement to any section
are, unless otherwise specified, to such section of this Agreement.
5.3 Construction. This Agreement is a Loan Document executed pursuant
to the Existing Credit Agreement and shall be construed, administered and
applied in accordance with all of the terms and provisions of the Existing
Credit Agreement.
5.4 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Georgia, without reference
to the conflicts or choice of law principles thereof.
5.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
5.6 Effectiveness. The amendments set forth in Section 1 hereof shall
become effective as of the date of this Agreement (and shall not apply to any
period prior to the date of this Agreement), upon the satisfaction of all of the
conditions precedent set forth in Section 3 hereof. Notwithstanding anything in
the immediately preceding sentence to the contrary, the Lenders hereby agree
that, as between the Lenders, (i) with respect to any outstanding Revolving
Loans made prior to the date of this Agreement, the new Lender Commitments and
Commitment Percentages as set forth in Exhibit A attached hereto take effect on
the date which is two (2) Business Days after the date of this Agreement, and
(ii) with respect to any Revolving Loans made on or after the date of this
Agreement, the new Lender Commitments and Commitment Percentages as set forth in
Exhibit A attached hereto will take effect on the date of this Agreement.
[Signatures appear on following pages]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers hereunder duly authorized as of the day
and year first written above.
BORROWERS:
AHL SERVICES, INC.
By: David L. Gamsey
Title: Chief Financial Officer
[CORPORATE SEAL]
ARGENBRIGHT SECURITY, INC.
By: David L. Gamsey
Title: Chief Financial Officer
[CORPORATE SEAL]
ARGENBRIGHT, INC.
By: David L. Gamsey
Title: Chief Financial Officer
[CORPORATE SEAL]
ADI U.K. LIMITED
By: David L. Gamsey
Title: Chief Financial Officer
[CORPORATE SEAL]
[Signature Page to Fourth Amendment to Amended and Restated Credit Agreement]
<PAGE> 6
AVIATION DEFENCE INTERNATIONAL
GERMANY LIMITED
By: David L. Gamsey
Title: Director
[CORPORATE SEAL]
ARGENBRIGHT HOLDINGS LIMITED
By: David L. Gamsey
Title: Chief Financial Officer
[CORPORATE SEAL]
THE ADI GROUP LIMITED
By: David L. Gamsey
Title: Director
[CORPORATE SEAL]
ADI ALPHA HOLDING GMBH
By: /s/
Title: Managing Director
[Signature Page to Fourth Amendment to Amended and Restated Credit Agreement]
<PAGE> 7
FIRST UNION:
FIRST UNION NATIONAL BANK, as
Administrative Agent and Lender
By: Michael Romano
Title: Assistant Vice President
[Signature Page to Fourth Amendment to Amended and Restated Credit Agreement]
<PAGE> 8
NEW LENDER:
SALOMON BROTHERS HOLDING
COMPANY INC., as Lender
By: Timothy J. Freeman
Title: Attorney-in-Fact
Address: 399 Park Avenue
New York, NY 10043
Attention:___________________
Telecopier: (212) 793-3963
[Signature Page to Fourth Amendment to Amended and Restated Credit Agreement]
<PAGE> 9
EXHIBIT A
SCHEDULE 1.1: LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
COMMITMENT COMMITMENT
LENDERS (DOLLARS) PERCENTAGE
------- --------- ----------
<S> <C> <C>
First Union National Bank and its Lender Affiliates $ 47,000,000.00 18.800%
Salomon Brothers Holding Company Inc. $ 40,000,000.00 16.000%
NationsBank, N.A $ 40,000,000.00 16.000%
SunTrust Bank, Atlanta $ 33,000,000.00 13.200%
Wachovia Bank N.A $ 25,000,000.00 10.000%
Fleet National Bank $ 25,000,000.00 10.000%
Dresdner Bank AG, New York and Grand Cayman Branches $ 15,000,000.00 6.000%
The Bank of Nova Scotia and its Lender Affiliates $ 15,000,000.00 6.000%
DG Bank Deutsche Genossenschaftsbank Cayman Islands Branch $ 10,000,000.00 4.000%
TOTAL: $250,000,000.00 100.000%
</TABLE>
<PAGE> 1
EXHIBIT 11
AHL SERVICES, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1999 1998
---- ----
<S> <C> <C>
Income Applicable to Common Stock:
Net income $ 3,731 $ 1,824
========= ========
Weighted Average Shares:
Common shares 16,475 13,605
Common share equivalents applicable to
stock options outstanding 627 502
--------- --------
Weighted average common and common
equivalent shares outstanding during
the period 17,102 14,107
========= ========
Per Share Amount:
Net income
Basic $ 0.23 $ 0.13
========= ========
Diluted $ 0.22 $ 0.13
========= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AHL
SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1999 AND THE
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 16,957
<SECURITIES> 0
<RECEIVABLES> 127,574
<ALLOWANCES> 2,057
<INVENTORY> 2,736
<CURRENT-ASSETS> 164,271
<PP&E> 40,999
<DEPRECIATION> 14,989
<TOTAL-ASSETS> 390,582
<CURRENT-LIABILITIES> 86,201
<BONDS> 93,737
0
0
<COMMON> 174
<OTHER-SE> 203,813
<TOTAL-LIABILITY-AND-EQUITY> 390,582
<SALES> 170,638
<TOTAL-REVENUES> 170,638
<CGS> 119,728
<TOTAL-COSTS> 119,728
<OTHER-EXPENSES> 42,893
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 2,126
<INCOME-PRETAX> 5,921
<INCOME-TAX> 2,190
<INCOME-CONTINUING> 3,731
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,731
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.22
</TABLE>
