Alternative Resources Corporation Reports Second Quarter Results.Business Editors BARRINGTON Barrington, town (1990 pop. 15,849), Bristol co., E R.I., on the Barrington River; settled c.1670, included in Massachusetts until 1746, inc. 1770. It is a residential and resort area. Barrington College is there. , Ill.--(BUSINESS WIRE)--Aug. 8, 2002 Alternative Resources Corporation (ARC) (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :ALRC ALRC Australian Law Reform Commission ALRC Alberta Research Council ALRC Airlift Logistics Readiness Center (USAF) ), a leading provider of information technology services, today announced results for the second quarter ended June 30, 2002. Revenue for the second quarter was $38.4 million, which was down from $54.8 million in the second quarter of 2001. The 29.9% drop in revenue is attributable to the slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in IT spending as companies continue to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. IT projects and eliminate headcount. Revenue for IT Solutions was $18.0 million, up from $16.4 million in the second quarter of 2001 and revenue for IT Staffing was $20.4 million, which was down from $38.4 million in the prior year period. The 9.8% increase in Solutions revenue was driven by growth in the Field Services, Smartsourcing and TDS TDS total dissolved solids. product offerings. ARC continues to benefit from strong customer relationships and quality delivery in its Solutions service offerings. Gross margins were 27.5%, which compares to the 28.0% in the first quarter of 2002 and 27.8% in the second quarter of 2001. Gross margins were negatively impacted by lower margins in the Managed Staffing Services and the TDS service offerings. Margins in the staffing business improved slightly. SG&A expenses, excluding a $1.1 million charge for severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when associated with the departure of the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , were $11.5 million or 30.0% of sales, which compares to $15.7 million or 28.7% of sales in the second quarter of 2001. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was a loss of $2.0 million including the severance charge as compared to a loss of $0.5 million in the second quarter of 2001. Earnings per share was a loss of $(0.10) for the second quarter of 2002, versus a loss of $(0.06) in the same period last year. For the first six months of 2002, revenue was $79.2 million, down from $114.4 million for the first six months of 2001. Staffing revenue was $43.1 million down from $80.5 million in 2001, with solutions revenue at $36.1 million, up from $33.9 million for the first six months of last year. Operating income was a loss of $(2.7) million compared to income of $0.2 million in 2001. Earnings per share was a loss of $(0.13) compared to loss of $(0.06) in 2001. In 2002, the Company adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ",(SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 142), which no longer requires the amortization of goodwill. The adoption of SFAS No. 142 did not have a material impact on the Company in 2002. The Company also adopted Emerging Issues Task Force No. 00-1, "Income Statement Characterization A rather long and fancy word for analyzing a system or process and measuring its "characteristics." For example, a Web characterization would yield the number of current sites on the Web, types of sites, annual growth, etc. of Reimbursements for "Out-of-Pocket" Expenses Incurred" (EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation No. 00-1). EITF No. 00-1 requires that certain out-of-pocket expenses out-of-pocket expenses n. moneys paid directly for necessary items by a contractor, trustee, executor, administrator or any person responsible to cover expenses not detailed by agreement. rebilled to customers be recorded as revenue versus an offset to the related expense. This had the effect of increasing revenue by $1.6 million in the second quarter of 2002 and by $1.9 million in the second quarter of last year. Cost of services were increased by an equal amount with no impact on gross profit. For the six months, the effect on revenue and cost of services was $3.0 million and $3.8 million in 2002 and 2001, respectively. OUTLOOK-2002 Mr. Watts Watts, residential section of south central Los Angeles. Named after C. H. Watts, a Pasadena realtor, the section became part of Los Angeles in 1926. Artist Simon Rodia's celebrated Watts Towers are there. , Chief Executive Officer, commented, "We are continuing to be cautious about the IT staffing business. However, we are beginning to experience some strength in the solutions business and would expect the third quarter to be flat compared to the second with some potential upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside depending upon the strength of our TDS service offering. Consequently, we will continue to keep tight controls over costs as we enhance our sales force and focus on growth opportunities." Q2 Investor Relations Investor relations The process by which the corporation communicates with its investors. Conference Call- August 8, 2002 Following this release, the Company will host a conference call with analysts and investors at 11:00 am EST EST electroshock therapy. EST abbr. electroshock therapy that will be broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at http:/www.arcnow.com. To access the webcast, participants should visit the About ARC, Investor Relations section of the website at least fifteen minutes prior to the start of the conference call to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. There will be a replay of the webcast available at the Company's web-site one hour after the call. About ARC ARC is a leading provider of information technology management and staffing services. The company has developed a significant, high quality business in the IT staffing industry with an emphasis on Help Desk, Desktop Support and Technology Deployment Service offerings. The company also has a consulting practice that supports those service offerings. The company operates through 39 field offices and with approximately 75 personnel in field sales, supported by 50 recruiters and its unique organization of over 40 client support managers. The company serves Fortune 1000 and mid-sized clients throughout the US and Canada. Forward Looking Statement Except for historical information, all of the statements, expectations and assumptions contained in the foregoing are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve a number of risks and uncertainties that could cause actual future results to differ materially from those anticipated in the forward looking statements, including, but not limited to attract and retain qualified technology professionals, to initiate and develop client relationships, to identify and respond to trends in information technology, to gain market acceptance of service offerings, to complete cost reductions and competitive influences as well as other risks described from time to time in the company's filings with the Securities and Exchange Commission. Although the Company has used its best efforts to be accurate in making those forward-looking statements, there can be no assurance that the assumptions made by management will materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. . In addition, the information set forth in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2001, describes certain additional risks and uncertainties that could cause actual results to vary materially from the future results covered in such forward-looking statements. The Company undertakes no obligation to publicly revise or update the forward-looking statements to reflect new information, subsequent events or otherwise. The above statements are based exclusively on current expectations and do not include the potential impact of any business combinations or divestitures that may be completed after the date of this release.
Three Months Six Months
Ended June 30, Ended June 30,
2002 2001 2002 2001
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(Unaudited) (Unaudited) (Unaudited) (Unaudited)
CONSOLIDATED STATEMENTS
OF OPERATIONS
Revenue $ 38,403 $ 54,833 $ 79,162 $ 114,434
Cost of services 27,830 39,576 57,166 82,326
----------------------- -----------------------
Gross profit 10,573 15,257 21,996 32,108
Operating expenses
Selling, general and
administrative
expenses 10,454 14,376 21,363 29,056
Other Charges 1,100 0 1,100 0
Depreciation and
amortization 1,056 1,370 2,203 2,838
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Total operating
expenses 12,610 15,746 24,666 31,894
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Income (loss) from
operations (2,037) (489) (2,670) 214
Other expense, net (928) (1,132) (1,739) (1,874)
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Loss before income
taxes (2,965) (1,621) (4,409) (1,660)
Income tax benefit (1,275) (615) (2,225) (583)
----------------------- -----------------------
Net loss $ (1,690) $ (1,006) $ (2,184) $ (1,077)
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Basic and Diluted
loss per share $ (0.10) $ (0.06) $ (0.13) $ (0.06)
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Weighted average
common and common
equivalent shares
outstanding 17,263 16,805 17,072 16,805
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SELECTED OPERATING
DATA
Gross margin 27.5% 27.8% 27.8% 28.1%
Operating margin -5.3% -0.9% -3.4% 0.2%
Net margin -4.4% -1.8% -2.8% -0.9%
June 30, December 31,
2002 2001
-----------------------
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
Cash and short-term investments $ 53 $ 127
Accounts receivable, net 33,192 36,489
Net property and equipment 12,571 14,592
Other assets 10,745 9,122
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Total assets $ 56,561 $ 60,330
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Liabilities 25,420 28,794
Debt 25,799 26,877
Stockholders' equity 5,342 4,659
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Total liabilities and stockholders'
equity $ 56,561 $ 60,330
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