Back to GetFilings.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number: 0-7907

ABLEST INC.
(Exact name of registrant as specified in its charter)

(727) 299-1200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.05 par value
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act: None

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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements, incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ( ).

1

Table of Contents

The aggregate market value of the Registrant’s common shares held by non-affiliates at March 8, 2001 was approximately $5,697,000.

The number of common shares of the Registrant outstanding at February 28, 2001 was 2,937,529.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference in the following part of this report: Part III — the Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission and used in connection with the solicitation of proxies for the Registrant’s annual meeting of shareholders to be held on May 10, 2001.

2

Table of Contents

PART I

ITEM 1. Business

General.

Prior to March 13, 2000, the Company operated as C. H. Heist Corp. with two service segments: Staffing Services and Industrial Maintenance.

On March 13, 2000, the Company sold substantially all of the assets of its United States industrial maintenance business and the stock of its Canadian subsidiary, C. H. Heist Ltd., to Onyx Industrial Services, Inc. (Onyx). For the fiscal years reported herein, the Company’s industrial maintenance business is being reported as a discontinued operation. See note 2 to the Consolidated Financial Statements included under item 8 to this report on Form 10-K for additional information on the discontinued operations.

Also on March 13, 2000, following the sale of the Company’s industrial maintenance business to Onyx, the Company was reincorporated in Delaware, changed its name to Ablest Inc. and became a pure-play staffing services company.

On January 1, 2001, Ablest Service Corp, Milestone Technologies Inc. and P.L.P. Corp (part of the discontinued operations) merged into Ablest Inc. to form a single operating company under the Ablest Inc. name. See note 14 to the Consolidated Financial Statements included under item 8 to this report on Form 10-K for additional information on the re-incorporation.

Staffing Services

The Company supplies staffing services in the United States. Staffing services are principally provided through 54 offices currently located in the Eastern United States and selected Southwestern markets with the capability to supply staffing services for the clerical, industrial and technical needs of their customers. Ablest does not service any specific industry or field; instead, its services are provided to a broad-based customer list.

On April 13, 1998, Ablest purchased 100% of the common stock of Milestone Technologies, Inc., an information technology staffing services provider in the Phoenix, Arizona metropolitan area. On November 17, 1998, Ablest purchased certain assets from SoftWorks International Consulting, Inc., an information technology staffing provider in the Denver, Colorado metropolitan area. See note 11 to the Consolidated Financial Statements included under item 8 to this report on Form 10-K for additional information on acquisitions.

The staffing services business is highly competitive. There are numerous local, regional and national firms principally engaged in offering such services. The primary competitive factors in the staffing services field are quality of service, reliability of personnel and price.

3

Table of Contents

Industry Segments and Service Activities. The following table is a summary of information relating to the Company’s operations in its two industry segments for each of the Company’s last three fiscal years: The discontinued operation noted refers to the Company’s former industrial maintenance operations.

The following table sets forth the approximate percentages of revenues by service activity within the Company’s two operating segments for the continuing operations for each of the Company’s last three fiscal years:

Working Capital. By virtue of the nature of the Company’s business, the attainment and maintenance of high levels of working capital is not required, other than to meet debt requirements as disclosed in Note 6 to the Consolidated Financial Statements shown under item 8 to this Form 10-K.

Backlog. In view of the fact that the Company’s services are primarily furnished pursuant to purchase orders or on a call basis, backlog is not material.

Employees. The ongoing staffing business comprises approximately 4,561 persons, 186 of which were full time at December 31, 2000. The Company considers its employee relations to be satisfactory.

Canadian Operations. Up through March 13, 2000, the Company’s former industrial maintenance business included operations in Canada. In connection with the sale of the industrial maintenance business all of the common stock of the Company’s Canadian Subsidiary, C. H. Heist, Ltd., was sold to Onyx Industrial Services, Inc. The operations of the Canadian subsidiary, up through the sale date, are included with the discontinued operations. See note 2 to the Consolidated Financial Statements included under item 8 to this report on Form 10-K for additional information on the discontinued operations.

4

Table of Contents

Executive Officers of Registrant

(a)

Identification. The Company’s executive officers are:

Through March 12, 2000, the following individuals were also executive officers of the Company and have since left the Company to either join Onyx Industrial Services or to seek other business opportunities: Duane F. Worthington, Vice President U.S. Operations, C. H. Heist Corp.; Andrew R. Crowe, Jr., Vice President and Chief Operating Officer, C. H. Heist, Ltd. and Christopher H. Muir, Vice President Marketing and Sales, C. H. Heist Corp.

(b)		Arrangements and Understandings. There are no arrangements or understandings pursuant to which the above officers were elected.
(c)		Family Relationships. None of the officers has any family relationship with any other officer of the Company.

5

Table of Contents

ITEM 2. Properties

The Company currently leases 13,724 square feet of office space in Clearwater, Florida that serves as its corporate headquarters. Fifty-eight additional facilities are leased at rentals and under terms and conditions prevailing in the various service locations. The Company considers all of its offices and facilities suitable and adequate for servicing its customers.

As part of the industrial maintenance asset sale, the Company’s administrative facility in Buffalo, New York was sold to Onyx Industrial Services, Inc. The services performed by the administrative group were relocated into the new corporate leased facility in Clearwater, Florida. The Company’s former executive office building, located in Clearwater, Florida, was also sold during 2000. The services performed by the executive group were relocated as well to the new corporate headquarters.

ITEM 3. Legal Proceedings

The Company is subject, from time to time, to claims encountered in the normal course of business. In the opinion of management, the resolution of all pending matters will not have a material adverse effect on the Company’s financial condition or liquidity.

ITEM 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders of the Company during the fourth quarter of fiscal 2000.

A special meeting of security holders was held on March 6, 2000, to vote on and approve the sale of the Company’s industrial maintenance business to Onyx Industrial Services, Inc. and the re-incorporation of the Company in Delaware as Ablest Inc. Both resolutions were passed with more than the required two-thirds majority.

6

Table of Contents

PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

(a)(i) Market for Registrant’s Common stock:

The Company’s common stock currently trades on the American Stock Exchange under the symbol “AIH”. For the period from March 13, 2000 to November 20, 2000 the Company’s common stock was traded under the symbol “ABI”. Prior to March 13, 2000 the common stock was traded under the symbol “HST”.

(a)(ii) Price Range of Common Stock:

The price ranges applicable to the common shares during each quarter of the years ended December 31, 2000 and December 26, 1999, are as follows:

(b) Approximate Number of Common Shareholders:

On December 31, 2000, there were 523 registered shareholders.

(c) Dividends:

The Company currently does not pay a dividend on its common shares.

ITEM 6. Selected Financial Data
               (In thousands, except per share data)

• Restated to reflect discontinued operations, which are more fully discussed in note 2 to the consolidated financial statements.

7

Table of Contents

The following summarizes quarterly operating results:

* Restated to reflect discontinued operations, which are more fully discussed in note 2 to the consolidated financial statements.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statements made in this discussion, other than those concerning historical information, should be considered forward-looking and subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated.

On March 13, 2000, C.H. Heist Corp. sold substantially all of the assets of its United States industrial maintenance business and the stock of C. H. Heist Corp.’s wholly owned Canadian subsidiary, C.H. Heist, Ltd., to Onyx Industrial Services, Inc. Taken together, these assets comprised substantially all of the assets of C. H. Heist Corp.’s industrial maintenance operations. Included in the sale was the C. H. Heist Corp.’s administrative and warehousing facility in Buffalo, New York. Also on March 13, 2000, C. H. Heist Corp. merged into a newly formed company, Ablest Inc. (the Company), and was re-incorporated in the state of Delaware.

For financial reporting purposes, the Company’s former industrial maintenance business is being reported as a discontinued operation. The following discussions and analysis of operations and financial condition pertain to the Company’s staffing services business, which constitutes the continuing operation. A separate section labeled “Discontinued Operations’ is included at the end of this discussion and pertains to the disposal of the industrial maintenance business.

8

Table of Contents

For the fiscal year ended December 31, 2000, compared to December 26, 1999.

Fiscal Year 2000 was comprised of 53 weeks compared to 52 weeks in fiscal 1999.

Results of Operations:

Service revenues increased by $5.3 million or 5.4% to $103.4 million from $98.1 million for the year ended December 31, 2000 compared to the year ended December 26, 1999.

Service revenue in the Company’s commercial staffing services segment increased by $11.6 million or 15.3% to $88.2 million from $76.6 million for the current year compared to one year earlier. Of this amount $12.0 million was from seven offices opened in fiscal 1999 and six offices opened in fiscal 2000. All of the branches opened in the prior fiscal year were profitable in the current fiscal year and three of the six offices opened in 2000 were profitable for the period ending December 31, 2000. Increases in service revenue for this segment were generated by the Company’s Vendor-on-Premises programs (Point Source) that were secured and started in the current year.

Service revenues in the Company’s information technology staffing segment decreased by $6.3 million or 29.4% to $15.2 million from $21.5 million for the current year compared to one year earlier. This decline reflects the continued post Y2K industry-wide slowdown in information technology spending. Ablest Technology Services is in the process of shifting from its original focus of primarily servicing low-end solutions work toward applications where trained professionals are scarce but generate higher margins. Additionally, managerial and structural changes have been made to this segment during fiscal 2000 to position it to take advantage of the changing marketplace for information technology services in 2001 and to endeavor to halt the decline that has occurred in this segment over the past 18 months.

Gross profit dollars increased by $625,000 or 2.8% to $22.8 million from $22.2 million for the current year compared to 1999. Gross profit margin declined to 22.1% from 22.6% over the same period. The increase in gross profit dollars is primarily the result of the increased service revenue generated by the commercial staffing segment, which was partially offset by the decline in service revenues from the information technology staffing segment. The decline in gross profit margin is primarily the result of the increase in Point Source programs noted previously that generate lower margins on higher volumes. These programs generally require the use of tiered staffing suppliers on a direct passthrough basis. Billings for these services were approximately $1.5 million in 2000 compared to $456,000 in 1999. Without these passthrough services the gross profit margin would have been 22.4% in the current year compared to 22.7% in 1999. In addition, the demand for full time placements, which produce higher gross margins, was less in 2000.

Selling, general and administrative expenses, inclusive of amortization expense, increased to $21.6 million from $20.6 million for fiscal 2000 compared to 1999. As a percentage of service revenues selling, general and administrative expenses declined to 20.9% from 21.0%. Contributing to the increase in selling, general and administrative expense dollars were transitional expenses associated with the closing and subsequent relocation of the Company’s administrative office in Buffalo, New York to the new leased corporate facilities in Clearwater, Florida, during the first half of 2000. Selling, general and administrative expenses during the second half of 2000 declined by $266,000 over the same period one year earlier. This decline is partly attributed to a leveling-off of corporate expenses as the company settled into its new corporate facility. In addition, adjustments were made in the Company’s information technology staffing segment to right size the operation to the level of activity being generated. Also contributing was a decrease in amortization expense of $358,000 in the current year compared to 1999. This decrease is the result of the intangible asset impairment charge taken by the Company in the fourth quarter of fiscal 1999. The remaining intangible assets were reviewed at year-end and found to adequately support projected cash flows.

9

Table of Contents

Results of Operations, continued:

Other income (expense) net improved in the current year by $443,000 to $14,000 compared to a net other expense of $429,000 for fiscal 1999. In March, the company used a portion of proceeds from the sale of its industrial maintenance business to pay off its revolving term debt. The result was a decline in interest expense of $404,000 in the current year compared to 1999.

The effective tax rate is 50.9% for the current year. The effective tax rate is the result of the multiple taxing jurisdictions in which the company operates and the non-deductibility for tax purposes, of certain expenses incurred by the Company. Additionally, changes in estimates of previously recognized tax benefits also increased the current year effective tax rate.

Financial Condition:

The following information is provided as of December 31, 2000.

The quick ratio was 2.9 to 1 compared to 1.6 to 1 at December 26, 1999, and the current ratio was 3.5 to 1 compared to 1.8 to 1 for the same respective periods. Net working capital increased by $6.2 million during the current year. Contributing to this increase was an increase in accounts receivable of $1.1 million and an increase in deferred income taxes of $1.4 million. Also contributing to the increase in working capital was a reduction in accounts payable of $1.0 million and a reduction in accrued expenses and other current liabilities of $2.5 million. The increase in accounts receivable is associated with the increase in service revenues in the Company’s commercial staffing segment while the increase in current deferred tax assets is a result of increases in the Company’s reserves for its retrospective insurance program and in deferred taxes associated with the sale of the Company’s industrial maintenance business. The reduction in accounts payable is the result of the inclusion of certain trade accounts payable related to the sale of the industrial maintenance business to Onyx. Accrued expenses decreased primarily as a result of the payment of the Company’s prior year retrospective insurance adjustment and the payment of accrued incentive compensation from the prior year. Reference should be made to the consolidated statement of cash flows, which details the sources and uses of cash.

Open credit commitments were $19.85 million at December 31, 2000. A portion of the proceeds from the sale of the industrial maintenance business was used to pay off the Company’s then outstanding debt in its entirety in March 2000. Effective for 2001, the Company’s revolving term loan agreement was reduced to $5.0 million and is set to mature on August 1, 2001. The Company is in the process of replacing the existing credit facility and anticipates availability of a new facility by July 31, 2001.

Capital expenditures for 2000 were $1.0 million. Of this amount $569,000 was for computer hardware, software and office automation systems, $186,000 was for leasehold improvements and the balance was for furniture and fixtures.

It is anticipated that existing funds and cash flows from operations will be sufficient to cover working capital needs and capital expenditures for 2001.

Discontinued Operations:

During the current fiscal year, an adjustment was made to the previously recorded loss on sale of discontinued operations to reconcile amounts previously recorded against continuing operations but which pertained to the discontinued operations. Expenditures associated with the winding down of the discontinued operations were charged against the various reserves established at the measurement date of September 26, 1999. At that time, reserves were established for an anticipated loss on the sale of discontinued operations, holding period losses, severance payments and transactional expenses. Management believes that balances

10

Table of Contents

Discontinued Operations, continued:

remaining in the respective reserves will be sufficient to cover future anticipated expenses associated with the discontinued operations.

For the fiscal year ended December 26, 1999, compared to December 27, 1998

Results of Operations:

Service revenues in the Company’s staffing services segment for the fiscal year ended December 26, 1999, increased by $19.6 million or 25.0% to $98.1 million from $78.5 million, one year earlier. Service revenues in this segment’s commercial staffing division increased for the fiscal 1999 year by $16.8 million or 28.1% to $76.6 million from $59.8 million, one year earlier. Revenues generated from seven offices opened in fiscal 1999 as well as greater market penetration in existing offices contributed to this increase. Service revenues in this segment’s technology services division increased for 1999 by $2.8 million or 15.0% to $21.5 million from $18.7 million, one year earlier. The increase in service revenues is the result of two offices within this division being acquired during the prior fiscal year and as such, not being included in service revenues for the full prior fiscal year. During the Company’s fourth quarter of 1999, this division lost a contract to provide technology staffing services to a national financial services provider. Service revenues to this customer accounted for 17.0% of total technology service revenues for the first three fiscal quarters of 1999. This division has not been successful in securing orders to replace the volume of services lost from this contract.

Gross profit from continuing operations for 1999, increased by $3.8 million or 20.6% to $22.2 million from $18.4 million, one year earlier. As a percentage of service revenues, gross profit decreased by .9% to 22.6% from 23.5% over the same period year to year. The increase in gross profit dollars is the result of the increased service revenues noted above while the decrease in gross profit percentage is predominately the result of increased operating expenses including increases in workers compensation insurance. Also contributing to the decrease in gross profit percentage is the lower operating gross profit being generated by the technology staffing division which decreased to 25.0% in fiscal 1999, from 25.8% in fiscal 1998.

Selling, general and administrative expenses, inclusive of amortization expense and exclusive of the charge for the impairment of intangible assets, increased for 1999, by $4.1 million or 24.8% to $20.6 million from $16.5 million, one year earlier. The increase in selling, general and administrative expenses is primarily the result of the opening of new offices during 1999, additional staffing necessary to service the growth in revenues in existing offices and an increase in corporate expenses to provide support services to field operations. Also, contributing to this increase was a $218,000 increase in amortization expense associated with acquisitions that were completed in previous years.

During the fourth fiscal quarter of 1999, the Company recorded a charge of $5.1 million for the impairment of intangible assets. The impairment charge was the result of the Company’s historical policy of evaluating events and circumstances which have occurred and which may indicate that the carrying value of intangible assets warrant adjustment. The intangibles were determined to have been impaired as a result of the loss of a major customer in the fourth quarter of 1999, the less than anticipated operating results of the acquired businesses and their inability to meet the income projections that were used in determining the purchase prices that were paid for these operations.

Other expense, net increased by $136,000 or 46.4% to $429,000. Interest expense, net increased by $151,000 as the Company maintained a higher level of borrowing to support the growth of new offices and to finance increased receivables.

11

Table of Contents

Results of Operations, continued:

The effective tax rate for the continuing operations was a tax expense of 1.7% even though the operations incurred a significant loss. The majority of the asset impairment write down was attributable to the Company’s acquisition of Milestone Technologies, Inc. in fiscal 1998. Since the acquisition was a stock purchase, the intangible asset write down was not deductible for income tax purposes. See footnote number 8, Income Taxes, to the accompanying financial statements for a more detailed analysis of income taxes.

Discontinued Operations:

The loss from discontinued operations consist of the Company’s industrial maintenance business through the measurement date of September 26, 1999, which represents the date of the signing of the letter of intent between the Company and Onyx Industrial Services, Inc. Estimated operating results for the period from September 27, 1999, through the closing date of March 13, 2000, are included in the loss on sale of discontinued operations, noted below.

Service revenues for discontinued operations for the period ended December 26, 1999, declined by $2.9 million to $54.3 million from $57.2 million, one year earlier. Gross profit dollars declined by $2.7 million or 13.6% and were primarily the result of increased costs for direct labor associated with the performance of services, including related payroll taxes and employee benefits. Selling, general and administrative expenses remained relatively unchanged at $19.9 million for the current fiscal year, compared to the year earlier.

The estimated loss on the disposal of the industrial maintenance operations is $7.1 million (net of a tax benefit of $2.8 million). This consists of an estimated loss on disposal of the business of $5.5 million and a provision of $1.6 million for anticipated operating losses from the measurement date to the disposal date of March 13, 2000 (holding period loss). The tax benefit recorded in connection with the loss on disposal differs from the tax benefit calculated by using statutory rates as a result of certain foreign currency exchange losses, net operating losses and foreign tax credit carryforwards, which are not expected to be utilized. For the most part, management has estimated the above noted items. A final reconciliation will be made against the estimates with adjustments recorded in future periods.

ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk

The Company, in the normal course of business, has exposure to interest rate risk from its long term debt obligations and prior to March 13, 2000 on foreign exchange rate risk with respect to its foreign operations and currency conversions. The Company does not believe that its exposure to fluctuations in either interest rates in the United States or currency exchange rates with regards to the Canadian dollar are material. A 10% change in the interest rate utilized on its long term debt obligations would have produced approximately a total of $21,800 in additional interest expense ($9,900 for continuing operations and $11,900 for discontinued operations) for the fiscal year ended December 31, 2000. Likewise, since the majority of the Company’s revenues, expenses and cash flows are transacted in U.S dollars a 10% decline in the Canadian exchange rate would have impacted the adjustment to loss on sale of discontinued operations for fiscal 2000 by approximately $6,800.

Due to the immateriality of the above noted market risks, the Company has decided not to utilize any form of financial instrument as a hedge against these risks.

12

Table of Contents

ITEM 8. Financial Statements and Supplemental Data

Index to Financial Statements and Schedules

13

Table of Contents

Independent Auditors’ Report

The Board of Directors
Ablest Inc.

We have audited the accompanying consolidated balance sheets of Ablest Inc. and subsidiaries as of December 31, 2000 and December 26, 1999, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years ended December 31, 2000, December 26, 1999 and December 27, 1998. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ablest Inc. and subsidiaries as of December 31, 2000 and December 26, 1999 and the results of their operations and their cash flows for the years ended December 31, 2000, December 26, 1999 and December 27, 1998, in conformity with accounting principles generally accepted in the United States.

KPMG LLP

Tampa, Florida
February 16, 2001

14

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Consolidated Balance sheets
(In thousands, except share and per share data)

      See accompanying notes to consolidated financial statements.

15

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Consolidated Statements of Operations
(In thousands, except share and per share data)

      See accompanying notes to consolidated financial statements.

16

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Statement of Stockholders' Equity
(In thousands, except share and per share data)

      See accompanying notes to consolidated financial statements.

17

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(In thousands)

(Continued)

      See accompanying notes to consolidated financial statements.

18

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, continued
(In thousands)

      (1) Excludes changes resulting from discontinued operations.

      See accompanying notes to consolidated financial statements.

19

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
Years ended December 31, 2000, December 26, 1999
and December 27, 1998

(1) Summary of Significant Accounting Policies

	Ablest Inc. (Ablest) and subsidiaries (the Company) is primarily engaged in staffing services. Ablest Service Corp., a wholly owned subsidiary, focuses on providing temporary and contract staffing solutions to businesses in the clerical, light industrial and technology professional sectors. On January 1, 2001, Ablest Service Corp. and Milestone Technologies Inc., its information technology staffing subsidiary, merged into Ablest Inc. to form a single operating company.
	Prior to March 13, 2000 the Company also provided industrial maintenance services through C. H. Heist Corp. domestically and in Canada through C. H. Heist Ltd., a wholly owned subsidiary. As further described in note 2, the Company sold substantially all of the assets of its industrial maintenance operations on March 13, 2000, including the stock of C. H. Heist, Ltd. The accompanying consolidated financial statements as of and for the year ended December 31, 2000 separately reflect industrial maintenance operations as a discontinued operation. The 1999 and 1998 financial statements have been reclassified to conform to the 2000 presentation.

	Significant accounting policies followed by the Company are summarized as follows:

(a)		Fiscal Year

	The Company’s fiscal year ends on the last Sunday of December. The consolidated financial statements include 53 weeks for the year ended December 31, 2000 and 52 weeks for each of the years ended December 26, 1999 and December 27, 1998.

(b)		Principles of Consolidation

	The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which were wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation.

(c)		Cash Equivalents

	All highly liquid investments with original maturities of three months or less are considered cash equivalents.

(d)		Revenue Recognition

	Revenue and associated costs are recognized in the period the services are provided.

(e)		Property, Plant and Equipment

		Property, plant and equipment are stated at cost and are depreciated over the estimated useful lives of the respective assets, principally on the straight-line method. Leasehold improvements are amortized on the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives generally range from three to forty years.

20

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(g)		Intangible Assets

		The values ascribed to acquired intangibles are being amortized on the straight-line method primarily over periods of three to thirty years. The Company regularly evaluates whether events and circumstances have occurred that indicate the carrying amounts of intangible assets may warrant revision or may not be recoverable. In the event of possible impairment, the asset’s value will be determined by discounted projected net cash flows of the related business.

(h)		Income Taxes

		Income taxes are accounted for by the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and credit carryforwards and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date.

(i)		Earnings Per Share

		Basic earnings per share is computed by using the weighted average number of common shares outstanding. Diluted earnings per share is computed by using the weighted average number of common shares outstanding plus the dilutive effect, if any, of stock options. The dilutive effect of stock options was not significant for any of the years presented.

(j)		Foreign Currency Translation

		The former Canadian subsidiary utilized the Canadian dollar as its functional currency. Assets and liabilities were translated using rates of exchange as of the balance sheet date at the time of the sale and the statements of operations were translated at an average rate of exchange through March 12, 2000. The cumulative effect of foreign currency translation is included in the net assets of discontinued operations.

(k)		Use of Estimates

		Management has made a number of estimates and assumptions in preparing these financial statements to conform with generally accepted accounting principles. Actual results could differ from those estimates.

(l)		Stock Option Plans

		The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded on the date of the grant if the current market price of the underlying stock exceeded the exercise price. Statement of Financial Accounting Standards (SFAS) No. 123 “Accounting for Stock – Based Compensation,” established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123.

21

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Discontinued Operations

	In the fourth quarter of 1999 the Company adopted a plan to dispose of its industrial maintenance operations. On March 13, 2000 the Company completed the sale of substantially all of the assets of the Company’s U.S. industrial maintenance operations and all the stock of its Canadian subsidiary, C. H. Heist, Ltd., to Onyx Industrial Services, Inc. (Onyx). Taken together, these operations comprised substantially all of the Company’s industrial maintenance business. The base selling price was $20,000,000 in cash plus the assumption by Onyx of certain trade liabilities. The selling price was subject to adjustment in the event that the net assets delivered differ from a targeted amount agreed to by the parties. Additionally, $7,000,000 of the selling price was subject to escrow pending the formal assignment of certain customer relationships to Onyx. Of the amount to be held in escrow, $6,000,000 was attributable to one customer relationship. Prior to closing the sale to Onyx on March 13, 2000, the Company obtained the necessary assignment from this customer thereby releasing the proceeds. Based upon the 2000 activity of the other customer assignments with Onyx, $327,000 of the remaining escrow will not be received and, accordingly, the Company has excluded such amount from the estimated sales price in determining the loss on disposal of this business.
	The Agreement included certain other provisions, which could result in additional disposition costs for the Company. Such costs include environmental remediation at certain specific industrial maintenance branches, reimbursement of any uncollectible accounts receivable acquired by Onyx and the payment of certain severance costs. The Company has estimated and recorded in 1999, its net loss from the sale of its industrial maintenance operations. Such loss included management’s best estimate of the sale proceeds, the direct costs of the transaction, estimated costs associated with the contingencies contained in the Agreement and the basis of disposed net assets as of the measurement date. The actual amounts for these items and accordingly, the actual loss from disposal may differ from the estimate.
	The estimated loss on the disposal of the industrial maintenance operations recorded in 1999 was $7,086,000 (net of tax benefit of $2,772,000), consisting of an estimated loss on disposal of the business of $5,509,000 and a provision of $1,577,000 for anticipated operating losses from the measurement date to the expected disposal in March, 2000 (holding period loss). During fiscal 2000, an adjustment was made to reduce the loss on disposal by $185,000, net of taxes. The adjustment was based on the difference between the actual operating results, of the discontinued operations, during the holding period to the estimate used in the determination of the loss on sale of discontinued operations recorded in 1999. Based on information available at this time, management believes no additional adjustments to the loss on disposal are required. The tax benefit recorded in connection with the loss on disposal differs from the tax benefit calculated by using statutory rates as a result of certain foreign currency exchange losses, net operating losses and foreign tax credit carryforwards, which are not expected to be realized.
	A summary of the operating results of discontinued operations are shown on the follow page:

22

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(2) Discontinued Operations, continued

	The Company specifically allocated debt and interest expense that it attributed to each operating business segment. The amount of interest expense included in the income (loss) from discontinued operations was $198,000, $325,000 and $475,000 for the fiscal years 2000, 1999 and 1998, respectively.
	Comprehensive loss of these operations was $216,000, $266,000 and $234,000 in 2000, 1999 and 1998, respectively. The only item of other comprehensive loss is foreign currency translation.
	The income tax expense (benefit) attributable to discontinued operations differs from the amount determined by applying the statutory tax rate to income (loss) from discontinued operations before income taxes due to the effects of higher foreign tax rates, net operating loss and tax credit carryforwards.
	The industrial maintenance assets sold, the liabilities assumed by Onyx, the cumulative translation adjustment attributable to C.H. Heist, Ltd. and the accrued loss on sale have been segregated in the accompanying consolidated balance sheets as net assets of discontinued operations. The components are as follows:

23

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(3) Property, Plant and Equipment

	A summary of aggregate property, plant and equipment follows:

	Net property, plant and equipment has been allocated as follows:

(4) Intangible Assets

	A summary of intangible assets follows:

In the fourth quarter of 1999 the Company recorded a pre-tax write down of $5,071,000 of intangible assets relating to its acquired information technology staffing companies. The intangibles, primarily goodwill, were determined to have been impaired as a result of the loss of a major customer in the fourth quarter of 1999, the less than anticipated operating results of the acquired businesses and their inability to meet the income projections that were used in determining the purchase prices that were paid for these companies. The Company determined the amount of the impairment by comparing the projected future discounted cash flows of the businesses to the carrying value of the assets.

24

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(4) Intangible Assets, continued:

	Discount rates used were based on a risk adjusted rate of return. Based on the same review at December 31, 2000, no additional adjustments were necessary to the remaining asset values.

(5) Accrued Expenses

	A summary of accrued expenses and other current liabilities follows:

(6) Indebtedness

	At December 31, 2000, the Company had a $25,000,000 unsecured bank line of credit under a revolving credit agreement. The interest rate on borrowings under the line of credit was elected weekly by the Company and was either (i) the bank’s prime rate or (ii) the Secondary Market Certificate of Deposit (CD) Rate plus 3/4%. The rate in effect at December 31, 2000 was 7.275%. On July 31, 2001, the Company has the option of converting the then outstanding borrowings to a term loan, payable in twenty equal quarterly installments beginning August 1, 2002 and bearing interest at either (i) the bank’s prime rate plus 1/2% or (ii) the Secondary Market CD Rate plus 1-1/2%. If converted, the company continues electing, on a weekly basis, the interest rate to be charged. The revolving credit agreement contains working capital requirements, and limits the amount of liabilities, capital expenditures and payment of cash dividends. Under the most restrictive of these provisions, $1,000,000 of retained earnings is free of dividend restrictions at December 31, 2000. Due to the sale of the industrial maintenance operations, the Company was not in compliance with certain of the covenants included in the agreement and as such obtained a waiver from the bank. The Company also pays a commitment fee of 1/8% per annum on the average daily unused portion. Compensating balances, may be, but were not required, to be maintained.
	A portion of the proceeds from the sale of the industrial maintenance operations were used to pay the then outstanding balance owing on the revolving term loan agreement on March 14, 2000. The outstanding balance at that time was $15,950,000 and was allocated $6,750,000 to continuing operations and $9,200,000 to discontinued operations.
	Effective for 2001, the Revolving Term Loan Agreement between the Company and Manufacturers and Traders Trust Company dated August 21, 1995 was reduced to $5,000,000 and is set to mature on August 1, 2001. All other terms and conditions of the original loan agreement remain unchanged. The Company is in the process of replacing the existing credit facility with one that is more in line with the needs of a staffing company and anticipates having the new facility available by July 31, 2001.
	At December 31, 2000 there was $150,000 owing against the term loan agreement which was classified as a short term liability due to the agreement maturity date of August 1, 2001.

25

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Stock Option Plans

On May 5, 2000, the Company reserved 100,000 common shares for issuance in conjunction with its 2000 Independent Directors’ Stock Option Plan, (the “Plan”). The purpose of the Plan is to strengthen the alignment of interest between the independent directors and the shareholders of Ablest Inc. through increased ownership by the independent directors of the Company’s common stock. The Plan provides for the granting of options to purchase 6,000 shares of common stock on the date of the respective directors election to the board of directors’ and for the granting of options to purchase 1,500 common shares each time he or she is re-elected to the board. The price per share deliverable upon exercise is equal to 100% of the fair market value of the shares on the date the option is granted. The initial grant of options to purchase 6,000 common shares is exercisable in three equal, annual installments on the first, second and third anniversary of the grant thereof. All subsequent grants are exercisable on the first anniversary of the grant thereof. The term of each grant is 10 years from the date it is granted.

	A summary of stock option activity follows:

	At its regularly scheduled board of directors’ meeting held on August 23, 2000, the board approved the Ablest Inc. Option to Ownership Program, (the “Program”). The Program provides for the surrendering of stock options issued under the Company’s 1991 Stock Option Plan and the Company’s 1996 Leveraged Stock Option Plan and the purchase of restricted common stock of the Company through delivery of a full recourse promissory note in an amount equal to the aggregate purchase price of the common stock issued. The per share purchase price of the common stock issued was equal to the fair market value of the common stock on October 9, 2000 (the effective date of the Program). The number of common shares issued to each Program participant was based on a conversion factor determined by calculating the value of the various option grants previously issued, using the Black-Scholes Method, divided by the fair market price of the common stock available to purchase. A total of 234,716 option shares were surrendered and 55,313 common shares issued. The shares issued under the Program will be accounted for under variable plan accounting, as defined in SFAS No. 123. As such, compensation expense may result in future periods in the event that the fair value of common shares increases or in the event the promissory notes are forgiven.
	The Company had reserved 375,000 common shares for issuance in conjunction with its 1991 Stock Option Plan (Plan). The Plan provided for the granting of incentive stock options and/or non qualified options to officers and key employees to purchase shares of common stock at a price not less than the fair market value of the stock on the dates options were granted. Such options were exercisable at such time or times as may be determined by the Compensation Committee of the Board of Directors and generally expired no more than ten years after grant. Options vested and became fully exercisable six months after the grant date. During the current year 39,407 options expired and 58,336 options were converted to common shares under the Option to Ownership Program.
	A summary of stock option activity follows on the next page.

26

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Stock Option Plans, continued:

At December 31, 2000, the range of exercise prices was $6.94 — $10.13. The remaining outstanding option grants pertain to retired, former key employees of the company and have no expiration date attached to them.

In May 1996, the Company’s shareholders approved the adoption of a Leveraged Stock Option Plan (Leveraged Plan) for key employees. The Leveraged Plan authorized the issuance of options covering up to 375,000 shares of common stock. Pursuant to the Leveraged Plan, 10% of a participant’s annual incentive compensation payment was made in the form of stock options, which were granted following the end of the fiscal year. The number of options and the exercise price were based on the average market price per share of common stock for the ten days prior to the calendar year end for which the option was granted. The exercise price of the options was subject to escalation at 8% per year over the original option price. Options vested after three years and were exercisable over a ten-year period from the date of grant. The Compensation Committee of the Board of Directors established the percentage of the compensation to be applied towards the options and the escalation percentage of the exercise price.

Effective in 2000, the Leveraged Stock Option Plan was terminated.

A summary of Leveraged Plan option activity is on the following page.

27

Table of Contents

ABLEST INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(7) Stock Option Plans, continued