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SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission File Number 1-10893

Ablest Inc.

1901 Ulmerton Road, Suite 300
Clearwater, Florida 33762
(727) 299-1200
(Address, including zip code, and telephone number, including area code, of principal executive offices)

     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 o

     The number of outstanding shares of the registrant’s Common Stock at June 29, 2003 was 2,868,722.

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ABLEST INC.

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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ABLEST INC.
Condensed Balance Sheets
(amounts in thousands except share and per share data)

See accompanying Notes to Condensed Financial Statements

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ABLEST INC.
Condensed Statements of Operations
(amounts in thousands except share and per share data)
(Unaudited)

See accompanying Notes to Condensed Financial Statements

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ABLEST INC.
Condensed Statements of Cash Flows
(amounts in thousands)
(Unaudited)

See accompanying Notes to Condensed Financial Statements

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ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)

1. COMPANY BACKGROUND

     Ablest Inc. (“Company”) offers staffing services in the United States. Staffing services are principally provided through 44 service locations in the Eastern United States and selected Southwestern markets with the capability to supply staffing services for the clerical, industrial and information technology needs of their customers. Positions often filled include, but are not limited to, data entry, office administration, telemarketing, light industrial assembly, order picking, shipping, network administration, database administration, program analyst, web development, project management and technical writing. Ablest does not service any specific industry or field; instead, its services are provided to a broad-based customer list.

2. BASIS OF PRESENTATION

     These interim financial statements have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States for interim financial information, the instructions to Quarterly Report on Form 10-Q, and Rule 10-01 of Regulation S-X and should be read in conjunction with our Annual Report on Form 10-K for the year ended December 29, 2002. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

     All adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been reflected in these condensed financial statements. The operating results for the twenty-six week period ended June 29, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending December 28, 2003.

     In order to maintain consistency and comparability between periods presented, certain amounts have been reclassified from the previously reported consolidated financial statements to conform with the financial statement presentation of the current period.

3. NEW ACCOUNTING PRONOUNCEMENTS

     In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standards No. 148, (“SFAS No. 148”), “Accounting for Stock-Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123.” SFAS No. 148 amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for fiscal years ending after December 15, 2002 and did not have a material financial impact upon the Company.

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ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)

4. SHORT-TERM BORROWINGS

     On July 22, 2001, the Company signed a $5,000,000 Standard LIBOR Grid Note agreement (“LIBOR Agreement”) with Manufacturers and Traders Trust Company (“M&T”). The interest rate on borrowings under the unsecured credit facility is elected by the Company at the time of borrowing and is either (i) the bank’s prime rate or (ii) the 30, 60, or 90 day London Interbank Offered Rate (“LIBOR”) plus 250 basis points (“Modified LIBOR Rate”).

     The LIBOR Agreement is a one-year demand note that originally expired on July 21, 2001 and is renewable annually with the consent of both parties. It does not contain working capital or other restrictive covenants. On June 14, 2002, the Company renewed the LIBOR Agreement for another year extending the expiration date to July 22, 2003. All other terms and conditions of the LIBOR Agreement remain unchanged.

     The $2,000,000 in short-term borrowings on the balance sheet for June 29, 2003, was borrowed under this LIBOR Agreement. See Note 7, Subsequent Events, for additional information.

5. STOCKHOLDERS’ EQUITY

     The changes in stockholders’ equity for the twenty-six week period ended June 29, 2003 are summarized as follows:

6. STOCK OPTIONS

     The Company grants stock options for a fixed number of shares to executive officers, certain other key employees, and independent directors. On May 20, 2003, the date of the Company’s Annual Meeting of Shareholders, upon re-election to the Board of Directors (“Board”), the independent directors of the Board were granted options to purchase 6,000 shares as per the terms of the Company’s Independent Directors’ Stock Option Plan. The options become fully vested one year from the date of grant. The options are exercisable at the closing market price on the date of grant.

     The Company has elected to continue to use the intrinsic value method of accounting for stock options under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”. The following table represents the effect on net income and earnings per share if the Company had applied the fair value based method and recognition provisions of Financial Accounting Standards No. 123, (“SFAS No. 123”), “Accounting for Stock-Based Compensation”.

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ABLEST INC.
Notes to Condensed Financial Statements
(Unaudited)

7. SUBSEQUENT EVENTS

     In July 2003, the Company renewed the LIBOR Agreement for thirty days.

     On August 13, 2003, the Company signed a two year $7,500,000 Committed Revolving Credit Facility (“Facility”) to replace the existing LIBOR Agreement. The Company elects the interest rate on borrowings under the Facility at the time of borrowing at either the bank’s prime rate or the 30, 60, or 90 day LIBOR plus 200 basis points. The Facility expires on August 12, 2005 and is renewable for one year with the consent of both parties. The Facility requires the Company to maintain certain financial covenants including a tangible net worth ratio among other restrictions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Statements made in this discussion, other than those concerning historical information, should be considered forward-looking and subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. This notice is intended to take advantage of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. Risks and uncertainties include, but are not limited to, hiring and maintaining qualified employees, legislative and judicial reforms which could increase the cost of our services to our customers and make the use of staffing service providers less beneficial, the proper functioning of our management information systems and the continuing economic recession.

Results of Operations:

     The following discussion compares the quarter ended June 29, 2003 to the quarter ended June 30, 2002, and June 29, 2003 year to date to June 30, 2002 year to date and should be read in conjunction with the Condensed Financial Statements, including the related notes thereto, appearing elsewhere in this Report.

     Revenues totaled $24.3 million and $47.5 million for the quarter and year to date periods ended June 29, 2003 as compared to $26.2 million and $45.5 million for the quarter and year to date periods ended June 30, 2002. Revenue decreased $1.9 million for the quarter primarily due to a reduction in the needs of one large account and a decrease in information technology services billing. Information technology services continue to be especially hard hit by reduced corporate spending for these services in particular. Year to date commercial services revenue increased $2.0 million due to the addition of several large industrial customers and increased account penetration in others.

     Gross profit was $3.7 million and $7.8 million for the quarter and year to date periods ended June 29, 2003 as compare to $4.8 million and $8.4 million for the quarter and year to date periods ended June 30, 2002. Commercial services gross profit decreased by $800,000 for the quarter primarily due to a $600,000 increase in workers’ compensation self-insurance reserves for adverse developments in a small group of claims originated in 2001 and 2002. Year to date gross profit for the Company’s commercial services was flat for 2003 as compared to 2002. Gross profit for the Company’s information technology services decreased by $300,000 and $600,000 for the quarter and year to date periods ended June 29, 2003 as compared to the quarter and year to date periods ended June 30, 2002.

     Selling, general and administrative expenses decreased by $574,000, or 13.0%, and $522,000, or 6.1%, to $3.8 million and $8.1 million for the quarter and year to date periods ended June 29, 2003 as compared to the same periods ended June 30, 2002. The decrease reflects containment of costs and management of staff levels. Reductions include a decrease of $140,000 and $260,000 for the quarter and year to date periods ended June 29, 2003 as compared to the quarter and year to date periods ended June 30, 2002 related to information technology services as the Company continues to align those services with its business volume.

     There was no other income (loss) for the quarter ended June 29, 2003 as compared to a $14,000 loss for the quarter ended June 30, 2002. For the year to date period ended June 29, 2003, other income decreased $29,000 as compared to the year to date period ended June 30, 2002. The decrease was primarily the result of receiving interest income of $32,000 in the quarter ended March 31, 2002 that related to the Company’s amended 1998 federal income tax return.

     Income tax benefit of $44,000 was recorded for the quarter ended June 29, 2003 as compared to no tax benefit for the quarter ended June 30, 2002. Income tax benefit of $86,000 was recorded for the year to date period ended June 29, 2003, an increase of $115,000 as compared to the year to date period ended June 30, 2002 primarily due to a $201,000 refund received in first quarter 2002 for resolution of an IRS audit of the Company’s fiscal 1998 tax return.

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Liquidity and Capital Resources:

     The quick ratio was 2.5 to 1 and 3.2 to 1 at June 29, 2003 and December 29, 2002, respectively, and the current ratio was 2.8 to 1 and 3.5 to 1, for the same respective periods. Net working capital decreased by $64,000 to $10.5 million for the current year to date period. The decrease was primarily due to an increase of $1.7 million in cash, an increase in short term debt of $2.0 million and a decrease in accrued expenses of $300,000. Reference should be made to the Statement of Cash Flows, which details the sources and uses of cash. Capital expenditures were $117,000 during the current year to date period.

     During the second quarter, the Company continued to maintain its Standard LIBOR Grid Note Agreement (“LIBOR Agreement”) that allowed borrowing for general corporate needs of up to $5.0 million with interest calculated at the bank’s then prime lending rate or, at the Company's option, a rate calculated by using a formula which added 250 basis points or 2.5% to the thirty, sixty or ninety day LIBOR. The LIBOR Agreement was a one-year demand note that was due to expire on July 22, 2003, but was renewed for an additional thirty days while the Company and the bank negotiated a new two-year $7.5 million Committed Revolving Credit Facility (the "Facility") to replace the LIBOR Agreement. The Company and the bank entered into the Facility on August 13, 2003. The Company elects the interest rate on borrowings under the Facility at the time of borrowing at either the bank's prime rate or the thirty, sixty or ninety day LIBOR plus 200 basis points. The Facility expires on August 12, 2005, and is renewable for one year with the consent of both parties. The Facility requires the Company to maintain certain financial covenants including a tangible net worth ratio among other restrictions.

     It is anticipated that existing funds, cash flows from operations and available borrowings will be sufficient to cover working capital requirements and capital expenditures for the remainder of fiscal 2003.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Company does not believe that its exposure to fluctuations in interest rates is material.

ITEM 4. CONTROLS AND PROCEDURES

     Based on their evaluation, as of a date within 90 days prior to the date of the filing of this report, of the effectiveness of our disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have each concluded that our disclosure controls and procedures are effective and sufficient to ensure that we record, process, summarize, and report information required to be disclosed by us in our periodic reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms.

     Subsequent to the date of their evaluation, there have not been any significant changes in the Company’s internal controls or in other factors to the Company’s knowledge that could significantly affect these controls, including any corrective action with regard to significant deficiencies and material weaknesses. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

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PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company’s 2003 Annual Meeting of Shareholders was held on May 20, 2003. The following directors, comprising the entire Board of Directors of the Company, were re-elected to the Board of Directors for a term of one year expiring at the date of the Company’s 2004 Annual Meeting of Shareholders:

ITEM 5. OTHER INFORMATION

     Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

     (b)  Reports on Form 8-K

     The Company filed a report on Form 8-K dated April 30, 2003, under Item 9. The report included a press release reporting the Company’s results of operations and financial condition for the quarter ended March 30, 2003.

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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.

Date: August 13, 2003

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