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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 2002

Commission File Number 000-22195

AHL SERVICES, INC.

(Exact name of registrant as specified in its charter)

1000 Wilson Blvd, Suite 910

        Arlington, VA 22209        

(Address of Principal Executive Offices, including Zip Code)

(703) 528-9688

(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title of each class)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ¨ No x

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 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. ¨

The aggregate market value of the voting common stock held by non-affiliates of the registrant (based upon the closing sale price on The Nasdaq Small Cap Stock Market) on June 30, 2002 was approximately $15,061,000.

As of April 1, 2003, there were 15,246,792 shares of common stock, $.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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AHL SERVICES, INC.

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PART I

ITEM 1.    BUSINESS

GENERAL

AHL Services, Inc. (“AHL”), headquartered in Arlington, Virginia, is a leading provider of outsourced business services, including marketing support services in the United States and specialized staffing services in Germany. Our marketing support services strategic offerings include consumer promotion and fulfillment services, trade promotion and fulfillment services and retail merchandising. Our specialized staffing services provide electricians, welders, plumbers, customer service representatives and industrial workers for clients throughout Germany. Clients span a range of Global 500 companies, including major enterprises in the automotive, consumer products, entertainment and retail sectors.

Historically, AHL has also owned specialized staffing businesses in the United States and the United Kingdom and aviation and facility services businesses in the United States and Europe. The UK specialized staffing business was sold on March 19, 2002, and the US specialized staffing business was sold on October 13, 2000. The US and European aviation and facility services businesses were sold on December 29, 2000. In addition, on December 28, 2000, AHL abandoned operations of a division of marketing support services that was engaged in the store set-up business. The closing of this division, formerly called PIMMS, was completed on March 16, 2001.

AHL was incorporated in Georgia in 1997. Our corporate headquarters are located at 1000 Wilson Boulevard, Suite 910, Arlington, Virginia 22209. Our telephone number is (703) 528-9688.

RECENT DEVELOPMENTS

On March 31, 2003, AHL announced that an affiliate (the “Purchaser”) of CGW Southeast Partners IV, L.P. (“CGW”), a private equity firm specializing in middle-market investments, and certain AHL officers, directors and shareholders (the “Continuing Shareholders”) have agreed to acquire the outstanding shares of AHL not already held by CGW and the Continuing Shareholders through a proposed merger of AHL and the Purchaser (the “proposed merger”). The proposed merger, if completed, would constitute a going private transaction and would result in AHL no longer being publicly traded and no longer filing annual, quarterly and current reports with the SEC. In the proposed merger, holders of AHL’s common stock at the time of the proposed merger, other than Frank A. Argenbright, Jr., our Chairman, Kathleen B. Argenbright, Argenbright Partners, L.P., Francis A. Argenbright, Jr. Charitable Remainder Trust, A. Clayton Perfall, our chief executive officer, and Caledonia Investments plc, each of whom is a Continuing Shareholder, will receive $1.50 in cash for each share of AHL common stock held by such shareholder immediately prior to the proposed merger. Each share of AHL common stock held by the Continuing Shareholders will be converted into 1.5 shares of AHL’s newly-created Series B participating preferred stock. Following the transaction, the Continuing Shareholders will maintain an approximate 40% equity interest in AHL, and CGW will own the remaining equity interest of approximately 60%.

The proposed merger is expected to be completed in the third quarter of fiscal year 2003. The transaction is subject to the approval of the holders of a majority of AHL’s outstanding common stock, as well as the approval of a majority of the shares of AHL common stock not held by the Continuing Shareholders. It is also subject to CGW obtaining necessary financing and other customary closing conditions.

In addition, in connection with the proposed merger, AHL obtained the consent of its senior secured lenders to further extend the maturity date under its credit agreement, which was scheduled to expire on March 31, 2003. As extended, the credit agreement will expire on August 29, 2003, unless the proposed merger is cancelled, in which event it will expire on the date the proposed merger is cancelled.

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INDUSTRY OVERVIEW

The market for outsourced business services has evolved as companies increasingly outsource non-core functions. The outsourcing company provides on-site management of staff, assumes responsibility for a particular function and shares in the economic benefits derived from improved execution of the function. As businesses centralize purchasing decisions and seek to reduce the number of vendors with whom they do business, the ability of providers to offer national and international coverage is growing in importance. These trends, as well as the increasing need for capital and management depth for growth, are creating consolidation opportunities in the highly fragmented outsourcing services industry.

Marketing support services include a broad spectrum of activities that are required to implement a company’s strategies and plans. Important segments of the marketing support services industry include customer contact management, fulfillment, merchandising, direct mail, lead generation, Web design, database management and mining, continuity, loyalty, promotions and market research. The marketing support services industry is large, with significant growth expected as companies place greater emphasis on retaining existing customers by appealing to them on a more personalized basis.

We believe that a fundamental change is occurring across marketing industries—the move to customer centricity. Marketing has always been focused on the customer, but in the recent past has been hampered by the lack of customer specific information and slower than desired product development, delivery and execution. Explosive growth of the Internet and the introduction of sophisticated business intelligence applications have changed marketing at the most fundamental level. Technology has focused marketing programs on the individual rather than the generic masses.

The move to one-on-one interactive marketing and real time delivery has forced many companies to look outside their own marketing divisions to augment, enhance and extend their marketing execution capabilities. There is increasing demand for customer contact management, on both the customer service side as well as through customer analytics and profiling. Fulfillment and merchandising are also in demand as companies accelerate product development and sales and marketing campaign cycles. Many companies are seeking seamless customer service, fulfillment and merchandising services to ensure every customer has access to products whether the ‘store’ is down the street or online.

Temporary staffing is used primarily to manage short-term fluctuations in employment needs. Those needs may arise due to the seasonal nature of certain businesses or the geographic allocation of employment resources. Temporary staffing is also utilized in highly regulated employment countries to satisfy longer term needs to provide flexibility in the event of a change in demand for services or products. The dynamics of the temporary staffing industry make it highly sensitive to fluctuation in the broader economy. As a result, the industry is early cyclical, meaning that upon early signs of improving demand, companies tend to hire temporary rather than permanent workers.

With approximately 40 million employees, the German labor market has the potential to be one of the largest staffing markets globally. However, Germany continues to have restrictive regulations for temporary staffing, resulting in a relatively low penetration rate as compared to other European countries. Recent German legislation includes provisions that would remove many of the regulatory barriers to using temporary staffing to satisfy businesses’ employment flexibility requirements.

STRATEGY

In 2002, AHL focused on expanding its marketing support services to existing clients and creating operating efficiencies within its marketing support services businesses. Our marketing support services businesses serve a

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diverse group of long-term clients. We expect to leverage our strong client base to continue to grow our business in 2003. Our specific strategies include:

Partnering with clients at a higher level within the organization to meet their marketing needs.    For more than two years, we have targeted business development efforts to senior marketing executives in five primary industries: consumer products, automotive, entertainment, retail and financial services. Demonstrating our industry expertise and our service offerings to senior levels within our clients’ organizations has proven beneficial to both AHL and our clients. We believe this strategic focus is the primary reason AHL has seen growth in these industries.

Exploiting merchandising market opportunities.    The retail merchandising market is fragmented with predominantly unsophisticated competitors. Most outsource merchandising companies are small family operations that do not have the skills or resources to satisfy complex demands of Fortune 500 companies and large retailers. Furthermore, manufacturers’ internal organizations are expensive, burdened with heavy overhead costs and subject to chronic downsizing as retailers continue to transfer costs and squeeze manufacturers’ margins. Companies with internal merchandising groups are aligning with outsource partners to handle surge periods. As one of the largest merchandising suppliers with a guarantee of superior quality and execution, we believe we are well positioned to benefit from these market opportunities.

Transforming merchandising revenue base and building continuity business.    Our primary initiatives in transforming our revenue base include (1) eliminating business with unprofitable projects and chronic slow payers and (2) building our revenue base around a premier client list. For 2003, we are focused on building a foundation for large continuity business. We expect to accomplish this objective by targeting in-house merchandising organizations and focusing on large premier clients. In addition, we will focus on converting one-time projects to a continuity-based business.

Continuing to upgrade and improve facilities.    We have invested significantly in new facilities over the past few years. Within our trade promotion and fulfillment business, we have consolidated seven warehouses into one large 400,000 square feet facility, which significantly reduced our operating costs in 2002, while increasing available capacity. In 2003, we have already expanded our operations by opening warehouse facilities in Pennsylvania and Ontario, Canada. In 2003 and 2004, we intend to upgrade facilities for our Minnesota-based consumer fulfullment operations. We also intend to continue expansion of our customer service facilities in Canada.

Improving merchandising service quality.    We have begun several initiatives to improve the quality of our merchandising service. Among these key initiatives are: (1) changes in merchandiser reporting and monitoring to allow us to guarantee 95% completion on time and 100% completion within 24 hours of commitment, (2) movement to Internet reporting in order to allow clients on-line access to store execution updates, and (3) movement to merchandisers with Internet access which will allow faster and less costly communications with merchandisers.

Developing and enhancing information technology systems.    In 2003, we will evaluate additional value-added warehouse management modules to incorporate into our enterprise Oracle-based platform, Global Enterprise Management (“GEM”). We believe it will be cost effective to select off-the-shelf components for resource scheduling and labor planning. Also, in 2003 we intend to upgrade our retail merchandising platform to create the additional capacity required by our new e-merchandising offering. We are also launching new web based reporting and modeling systems that we believe are the leading edge in the marketing support services industry.

Continuing to reduce operating costs.    We have begun several initiatives that will reduce our operating costs. These initiatives include (1) increased application of technology throughout operations; (2) standardization of technology platforms as discussed previously; (3) focus on economies of scale and productivity gains;

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(4) utilization of cross-business teams to develop and implement consistent procedures and measurements; and (5) measurement of performance against standards in each facility.

SERVICES PROVIDED

The following table presents the percentage of AHL’s revenues by business line for the periods shown:

Marketing Support Services

Our marketing support services are performed by two operations: Archway Marketing Services (“Archway”), formerly known as Gage Marketing Services, and ServiceAdvantage. Archway provides consumer promotion and fulfillment services, which includes customer service operations, and trade promotion and fulfillment services. Archway has fulfillment centers located in Detroit, Michigan; Minneapolis, Minnesota; Kankakee, Illinois; Los Angeles, California; Allentown, Pennsylvania; Toronto, Canada; and Juarez, Mexico. Archway’s customer service centers are located in both the United States and Canada. Our ServiceAdvantage operations provide retail merchandising services across the United States through a network of field offices, with sales offices in Minneapolis, Minnesota; Troy, Michigan; Bentonville, Arkansas; and Taylorville, Illinois.

We provide a comprehensive array of marketing support services, enabling us to execute and administer complex, multifaceted marketing programs for our clients. These programs include the following:

Consumer Promotion and Fulfillment Services

Our consumer fulfillment services link our clients and their consumers through a broad range of marketing programs, including the execution of rebate and premium programs, sweepstakes and continuity marketing programs. We believe we are one of the largest and best-recognized providers of these services in the United States.

Consumer fulfillment is an important method of building loyalty for our client’s customers, and we provide integrated programs that include customer database management, processing and fulfilling orders. Our execution and administration of consumer promotion programs and direct response fulfillment services typically involve:

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We also provide customer service support for order processing and service inquiries in both business-to-consumer and business-to-business marketplaces. We provide highly customized inbound customer contact and help-care services utilizing state-of-the-art technology and processes. Transactions include order processing and inquiries relating to billing, product information, product uses, product problems or concerns and client services. We have particular expertise in consumer electronics, publishing, retail and consumer products.

Our experienced, well-trained professional customer service representatives provide quality customer service via the telephone and the Internet, order entry, data capture and market research, sales and technical support, dealer locating, customer surveys and other linked services with 7-day, 24-hour availability. Our Canadian locations can also accommodate special projects and overflow services.

Trade Promotion and Fulfillment Services

Our trade fulfillment services link our customers and their retail locations or business customers. Many corporations use our trade fulfillment services to distribute point-of-purchase displays, new product introduction literature, posters, banners, demonstration kits, signs, samples and other sales and marketing materials throughout extensive distribution and franchise networks. In providing these services, we:

Our dedicated account teams respond quickly and efficiently to Internet, mail, fax and telephone orders. We provide 24/7 access with interactive voice response, electronic data interface, Internet and intranet access. Orders can be processed and shipped within 24 hours, with same day shipping for rush orders.

We provide distribution services for companies seeking to maximize efficiency and speed to market. By acting as the hub for the entire distribution process, we can consolidate shipments for our clients. Our services include:

Retail Merchandising Services

We provide merchandising services to major consumer products manufacturers and large retail chains. Our retail merchandising operations help retailers and manufacturers ensure that in-store marketing plans are properly executed, products are properly displayed in the store and product remains available for purchase. We serve some of America’s largest consumer product companies, such as The Gillette Company, The Scotts Company and Eastman Kodak. In addition, we provide these services within the largest retail stores, including Wal-Mart Stores, Inc., Target Corporation and Kmart Corporation.

We provide a broad array of merchandising services on a national, regional, and local basis to manufacturers and retailers, including merchandising services primarily on behalf of consumer product manufacturers at mass merchandisers, drug and retail grocery stores. We provide two principal types of merchandising and sales services: continuity services and project services.

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Continuity services.    Continuity services consist of regularly scheduled routed merchandising services provided at the store level for manufacturers. We can provide shared services for multiple manufacturers, including, in some cases, manufacturers whose products are in the same product category.

Project services.    Project services consist primarily of specific in-store services initiated by retailers and manufacturers, such as new product launches, special seasonal or promotional merchandising, focused product support and product recalls. These services are used typically for large-scale implementations. We also perform other project services, such as new store sets and existing store resets, re-merchandising, remodels and category implementations, under shared service contracts or stand-alone project contracts.

Our retail merchandising services provide a vital link between the manufacturers and the consumers to enable manufacturers to track promotional and product responses without being lost in a large superstore.

German Specialized Staffing Services

AHL provides specialized staffing services throughout Germany. We have skilled and semi-skilled workers assisting large, Global 500 clients primarily in the automotive, engineering, aeronautical, food, call center and consumer packaged goods industries. Our employees perform skilled, semi-skilled and customer service tasks. Examples of these workers include electricians, welders, plumbers and mechanics. Although Germany continues to have restrictive regulations for temporary staffing, the restrictive labor market builds consistent demand for strategic temporary services, in which certain companies permanently lease a certain percentage of their staff to keep the highest possible flexibility. This situation is particularly true in the light industrial and automotive segments that AHL operates.

Historically, we also operated specialized staffing businesses in the United Kingdom. On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. After the sale, 100% of our staffing business is in Germany. We entered the German staffing market in 1998 and through a series of acquisitions have built Germany’s sixth largest specialized staffing company.

MANAGEMENT SYSTEMS

Our internal management systems contribute significantly to our daily operations, financial performance and customer service. We have invested, and will continue to invest, resources in the development of systems to grow and support the business needs of our clients and to provide the internal infrastructure required to deliver real time processing.

Our state-of-the-art marketing and sales support applications and related infrastructure provide the business with order entry and inventory control automation, organized distribution facilities, efficient out-bound logistics and valuable management database and reporting systems. Across all of our business lines, we have utilized technology to simplify, automate and integrate the administrative and management processes that serve our business units.

We utilize an open-systems strategy providing for substantial portability, scalability and flexibility. Technology supports our capacity since growth can be readily and economically accommodated in the core businesses by adding hardware and/or software that is consistent with the information technology strategy.

Our Global Enterprise Management (“GEM”) system is a proprietary, web-enabled, real-time, order entry, inventory management, fulfillment and shipping system that is one of the most advanced in the industry. Our database systems are custom built on Oracle relational databases. The system allows rapid, accurate order execution and high levels of real time inventory management. The GEM framework is designed to be easily customized to implement client specific business rules.

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CLIENTS

Marketing Support Services

We provided marketing support services to over 150 clients in 2002, with our current client base consisting primarily of companies engaged in the automotive, consumer products, entertainment and retail industries. We generally enter into one- to three-year contracts with our clients, pursuant to which we agree to provide services for a fixed number of programs per year. The scope and magnitude of the programs are customized to the need of the client. In fiscal 2002, our ten largest marketing support services clients accounted for approximately 40% of our marketing support services revenue, with no client individually exceeding 10% of consolidated revenues. A sample of our marketing support services clients include:

German Specialized Staffing Services

In the German specialized staffing business, we generally enter into contracts with our clients pursuant to which we agree to provide specialized staffing on an as needed basis at a specific rate to the client. In fiscal 2002, our top ten German specialized staffing services customers accounted for approximately 36% of our German specialized staffing services revenue, with one customer, BMW, providing 13% of consolidated revenues. A few of our German specialized staffing services clients include:

SALES AND MARKETING

Our objective is to develop long-term relationships with existing and potential clients to become the preferred provider of outsourced services. We target large corporations and institutions that have significant outsourcing needs, marketing our services to potential clients through senior management, field managers and our sales force. As part of our operating philosophy, we emphasize building and maintaining relationships with personnel at various levels of our clients’ organizations, including relationships with both senior executives and operating personnel.

The force behind our marketing support services sales and marketing strategy is market penetration through a vertical sales force and focused business unit sales forces. We have developed a sales and marketing infrastructure by marketing category. The following table details our vertical market structure and the percentage of total sales for each category of our marketing support services business.

COMPETITION

The outsourcing industry is extremely competitive and highly fragmented, with limited barriers to entry. Companies within the outsourcing industry compete on the basis of the quality of service provided, the range of

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services offered and price. We believe our competitive advantages include our reputation for providing high quality service and our ability to serve large clients. Many of our competitors offer a more limited range of services and focus on a few specific industries.

We compete in national, regional and local markets with outsourcing companies, specialized contract service providers and in-house organizations that provide services to potential clients and third parties. Our principal national competitors include:

EMPLOYEES

At December 31, 2002, our marketing support services operations had 8,266 employees, as detailed in the table below. We utilize contract employees obtained through agreements with independent employment agencies as business needs dictate. Approximately 6,200 of the non-exempt retail merchandising employees indicated below are part-time non-benefits eligible merchandisers. Approximately 150 employees in Michigan and Minnesota are represented under collective bargaining agreements expiring in 2003 and 2004, respectively. We consider our relations with our employees to be good.

Our German specialized staffing operations have a large base of skilled and semi-skilled workers assisting large, Global 500 clients primarily in the automotive, engineering, aeronautical, food, call center and consumer packaged goods industries. Our employees perform skilled, semi-skilled and customer service tasks. Examples of these workers include electricians, welders, plumbers and mechanics. At December 31, 2002, we had a total of 5,301 employees in this segment, with 4,992 employees in our specialized staffing operations and 309 administrative employees. None of these employees are parties to collective bargaining agreements.

DIVESTITURES AND ABANDONMENTS

On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. On December 29, 2000, we sold our US and European aviation and facility services businesses for $185 million in cash to Securicor plc (“Securicor”), a business services company headquartered in the United Kingdom. On October 13, 2000, we sold the assets of our US specialized staffing business to an investor group led by the former President of our Baltimore staffing operation for $22.5 million. On December 28, 2000, we made the decision to abandon operations of our store set-up business unit, formerly called PIMMS.

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ACQUISITIONS

The following table details our acquisitions of marketing support services businesses and German specialized staffing services businesses since our incorporation in 1997.

These acquisitions were financed with borrowings under our bank revolving Credit Facility (the “Credit Facility”) and proceeds from our follow-on public offering in January 1999.

WHERE YOU CAN FIND MORE INFORMATION

We make our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and all amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available (free of charge) on or through our Internet website, located at http://www.ahls.com, as soon as reasonably practicable after they are filed with or furnished to the SEC.

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ITEM 2.    PROPERTIES

Our executive headquarters are located in Arlington, Virginia, where we lease 4,400 square feet under an operating lease expiring in December 2003. In addition, our administrative offices are located in Plymouth, Minnesota in facilities under a lease expiring in May 2004.

We maintain 18 offices and facilities for marketing support services in various metropolitan areas in North America as detailed in the table below. All properties are under operating leases, with terms expiring from 2003 to 2016.

Our German specialized staffing services business currently has 73 branches.

ITEM 3.    LEGAL PROCEEDINGS

We are involved in various routine litigation, disputes and claims in the ordinary course of business, primarily related to employee and customer contract issues. While unfavorable outcomes are possible, management believes that resolving these matters will not have a material effect on the results of operations or financial condition of AHL.

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

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER

MATTERS

We completed our initial public offering on March 27, 1997, and our common stock was traded on the Nasdaq National Market under the symbol “AHLS.” We were notified on October 12, 2002 by the Nasdaq National Market that our closing bid price had failed to meet the minimum bid requirement of $1.00 for the previous 30 consecutive trading days. We were provided a 90 day grace period until January 13, 2003, to regain compliance. Because we were not able to maintain a bid price over $1.00 for 10 consecutive trading days prior to this date, effective February 3, 2003, our common stock began trading on the Nasdaq SmallCap Market under the symbol “AHLS”. The transfer to the Nasdaq SmallCap Market extended AHL’s grace period to achieve a $1.00 minimum bid price per share for the common stock to April 14, 2003. On April 14, 2003, we were notified by Nasdaq that we had regained compliance with the Nasdaq SmallCap Market’s minimum bid price per share requirement and that Nasdaq has closed its review of the matter.

The following table sets forth the high and low sales prices per share for the common stock, for the periods indicated, as reported by the Nasdaq National Market.

On April 1, 2003, the last sale price of our common stock as reported on the Nasdaq SmallCap Market was $1.34 per share, and there were 81 registered holders of record of our common stock.

DIVIDEND POLICY

We have never paid any dividends on our common stock and currently intend to retain all earnings to finance continued growth of our business for the foreseeable future. The payment of any dividends will be at the discretion of our board of directors and will depend upon, among other things, results of operations, financial condition, Credit Facility terms, cash requirements and other factors deemed relevant by the board of directors. Under the terms of our current Credit Facility, we are prohibited from paying dividends.

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EQUITY COMPENSATION PLAN INFORMATION

The following table presents information as of December 31, 2002 about our common stock that may be issued under the exercise of options, warrants and rights under our equity compensation plans:

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ITEM 6.    SELECTED FINANCIAL DATA

The following selected financial data are qualified by reference to and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this report. The selected financial data presented below as of and for each of the fiscal years in the three-year period ended December 31, 2002, have been derived from our financial statements, which have been audited by independent public accountants. AHL’s consolidated financial statements for fiscal years 2001, 2000, 1999 and 1998 have been restated to reflect the reclassification of our German specialized staffing business from discontinued operations to continuing operations. See Note 2 to the Consolidated Financial Statements. The reclassification adjustments for the two fiscal years ending December 31, 1999 have not been audited by independent public accountants. Except as otherwise stated, all amounts represent continuing operations of AHL.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to the risks discussed in this report.

OVERVIEW

AHL, headquartered in Arlington, Virginia, is a leading provider of outsourced business services, including marketing support services in the United States and specialized staffing services in Germany. Our marketing support services strategic offerings include consumer promotion and fulfillment services, trade promotion and fulfillment services and retail merchandising. Our specialized staffing services provide electricians, welders, plumbers, customer service representatives and industrial workers for clients throughout Germany. Clients span a range of Global 500 companies, including major enterprises in the automotive, consumer products, entertainment and retail sectors.

Our 1998 acquisition of Gage Marketing Services, now known as “Archway Marketing Services”, which has been in the marketing support services business for over 50 years, provided us with experienced personnel that have an understanding of the industry. Our integrated marketing execution solutions enhance the effectiveness and efficiency of many of the world’s most respected marketing companies. We deliver programs developed by manufacturers, retailers, service providers and advertising agencies, and are active in both business-to-consumer and business-to-business arenas. Our successful delivery of our marketing service

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offerings has enabled us to establish long-term client relationships with many of the largest companies in the world, with partnerships extending over several decades.

Historically, our specialized staffing operations also included operations in the United Kingdom and the United States. On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. On October 13, 2000, we sold the assets of our US specialized staffing business to an investor group led by the former President of our Baltimore staffing operation for $22.5 million. In previous years, we also operated aviation and facility services businesses. On December 29, 2000, we sold our US and European aviation and facility services businesses for $185 million in cash to Securicor. In addition, on December 28, 2000, we abandoned operations of a division of marketing support services that was engaged in the store set-up business. The closing of this division, formerly called PIMMS, was completed on March 16, 2001.

We have restated and reclassified our financial statements for each of the two years ended December 31, 2001. Except as otherwise stated herein, all information reflects such restatements and reclassifications.

The operating results, including impairment charges and related balance sheet accounts, of AHL’s German specialized staffing services business have been reclassified from discontinued operations to continuing operations in the consolidated financial statements for all periods presented. Beginning in the third quarter of 2001 and continuing into the fourth quarter of 2002, these operations were being actively marketed for sale and were therefore presented in accordance with Accounting Principles Board (“APB”) Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” as discontinued operations. This reclassification to continuing operations was required as a result of AHL’s proposed merger and our decision to cease marketing these operations.

In addition, we have determined that certain items of expense were incorrectly reported in our previously issued 2000 and 2001 financial statements. These items principally relate to the accounting for rent escalation clauses in leases, the computation of expense related to worker’s compensation exposures, the treatment of foreign exchange rate changes on intercompany borrowings and the recognition of liabilities and related expense related to restructuring and other charges. The most significant item relates to the determination of valuation allowances related to AHL’s net deferred tax asset. In 2001, at a time when we had incurred “significant cumulative losses” as defined by SFAS No. 109, “Accounting for Income Taxes”, we recognized a net deferred tax asset. This amount should have been reserved for through the recognition of an additional valuation allowance. While we do not believe that these adjustments were material to the 2000 or 2001 financial statements, they are required under generally accepted accounting principles and, if left uncorrected, their impact on 2002 or thereafter could be material. Accordingly, these items have been corrected in the accompanying restated 2000 and 2001 financial statements.

RECENT DEVELOPMENTS

On March 31, 2003, AHL announced that the Purchaser and the Continuing Shareholders have agreed to acquire the outstanding shares of AHL not already held by CGW and the Continuing Shareholders through a proposed merger of AHL and the Purchaser. The proposed merger, if completed, would constitute a going private transaction and would result in AHL no longer being publicly traded and no longer filing annual, quarterly and current reports with the SEC. In the proposed merger, holders of AHL’s common stock at the time of the proposed merger, other than the Continuing Shareholders, will receive $1.50 in cash for each share of AHL common stock held by such shareholder immediately prior to the proposed merger. Each share of AHL common stock held by the Continuing Shareholders will be converted into 1.5 shares of AHL’s newly-created Series B participating preferred stock. Following the transaction, the Continuing Shareholders will maintain an approximate 40% equity interest in AHL, and CGW will own the remaining equity interest of approximately 60%.

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The proposed merger is expected to be completed in the third quarter of fiscal year 2003. The transaction is subject to the approval of the holders of a majority of AHL’s outstanding common stock, as well as the approval of a majority of the shares of AHL common stock not held by the Continuing Shareholders. It is also subject to CGW obtaining necessary financing and other customary closing conditions.

In addition, in connection with the proposed merger, AHL obtained the consent of its senior secured lenders to further extend the maturity date under its credit agreement, which was scheduled to expire on March 31, 2003. As extended, the credit agreement will expire on August 29, 2003, unless the proposed merger is cancelled, in which event it will expire on the date the proposed merger is cancelled.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States. As such, management is required to make certain estimates, judgments and assumptions that they believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies which management believes are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Revenue recognition

We derive our marketing support services revenue primarily from three sources: (1) consumer promotion and fulfillment services, (2) trade promotion and fulfillment services and (3) retail merchandising services. Within our consumer promotion and fulfillment services operations, our call centers recognize revenue based on the number of calls and agents assigned, according to written pricing agreements. Our consumer and trade promotion and fulfillment services operations record revenue at the conclusion of the material selection, packaging and shipping process. Our retail merchandising services operations recognize revenue as services are rendered, based on contracted hourly billing rates. In general, we recognize revenues as programs are completed, services are rendered and/or as products are shipped in accordance with the terms of the contracts. Some of the contracts include postage and other items purchased by us as an agent on behalf of our client, who generally dictates all facets of the transaction, including the common carriers and level of postage class to be used. For these items, we record the net billings to our customers as revenue. Unbilled revenue is recorded in certain situations when the materials have been shipped, but invoicing did not occur until the subsequent accounting period. Work in process consists of labor and material costs for fulfillment programs and merchandising support services provided to customers that have not been completed. Work in process is not included in revenue at the end of an accounting period. Our German specialized staffing services operations record revenue as services are rendered, based on contracted hourly billing rates.

During the years ended December 31, 2002 and 2001 we had one customer in our German specialized staffing services operations that accounted for greater than 10% of revenues from continuing operations. During the year ended December 31, 2000, there were no customers that individually exceeded 10% of revenues from continuing operations.

Allowance for doubtful accounts

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer’s current credit worthiness, as determined by management’s review of their current credit information. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon historical experience and any specific customer collection issues that have been identified. While credit losses have historically been within management’s expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

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Self-insurance and other reserves

We participate in partially self-insured, high-deductible workers’ compensation and auto insurance plans for our US operations, while our German operations participate in a mandatory government insurance plan. For our US plans, exposure is limited per occurrence ($250,000 for workers’ compensation and auto liability claims) and in the aggregate. In addition, we are partially self-insured for health claims for certain US employees. Reserves are estimated for both reported and unreported claims. The determination of our obligation and expenses for workers’ compensation, auto and health insurance is dependent on certain assumptions used in calculating such amounts. Those assumptions include, among others, projected claims and the rate of increase in compensation and health care costs. We recognize these obligations on an undiscounted basis. Revisions to estimated reserves are recorded in the periods in which they become known. While there can be no assurance that actual future claims will not exceed the amount of our reserves, in the opinion of our management, any future adjustments to estimated reserves included in the accompanying consolidated balance sheets will not have a material impact on the consolidated financial statements.

As part of the strategic review of operations performed during 2001, we recorded additional reserves for various items, including costs of buying out unattractive or redundant leases, severance costs incurred in conjunction with the closing of the Atlanta corporate offices, legal and other expenses related to the abandoned PIMMS operation and other related items. Significant management judgment was required in determining the amount of these reserves, and while there can be no assurance that future costs will not exceed the amount of our reserves, in the opinion of our management, any future adjustments to estimated reserves included in the accompanying consolidated balance sheets will not have a material impact on the consolidated financial statements.

Impairment of long-lived assets

Our long-lived assets include goodwill and intangibles. At December 31, 2002, we had $62.0 million in goodwill and $4.0 million in net intangible assets, accounting for approximately 44.8% of our total assets.

In July 2001, Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”, was issued. Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The standard also requires a reassessment of the useful lives of identifiable intangible assets other than goodwill and a test for impairment of goodwill and intangibles with indefinite lives annually, and more frequently if events and circumstances indicate that the carrying amounts may not be recoverable.

AHL adopted the provisions of SFAS No. 142 effective January 1, 2002. Utilizing the services of an independent third party valuation expert, AHL performed a valuation of its goodwill utilizing a combination of discounted cash flows, the quoted market price of our common stock and a comparison to the value of comparable companies in our industry. Based on this analysis, we recorded an impairment charge in the amount of $20.7 million which is reflected as a cumulative change in accounting principle in the accompanying consolidated statements of operations. AHL’s marketing support services business completed its annual impairment analysis in the fourth quarter of 2002 and recorded an impairment charge in the amount of $45.1 million. AHL’s German specialized staffing services business recorded an impairment charge of $4.2 million in the second quarter of 2002.

Prior to AHL’s adoption of SFAS No. 142, it accounted for goodwill and intangible assets under the provisions of SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of”. Under SFAS No. 121, we reviewed our long-lived assets, including goodwill and identifiable intangibles, for impairment whenever events or changes in circumstances indicated that the carrying amount of such assets may not be recoverable. Our evaluation entailed a comparison between our undiscounted cash flows

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expected to be generated over the remaining life of our long-lived assets to the carrying value of these assets. If the amount of our expected undiscounted cash flows exceeded the carrying amount of these long-lived assets, no impairment was deemed to exist. We utilized the most recent operating budgets and forecasts used by management when performing this evaluation. During 2001, we committed to a plan to sell our German specialized staffing business. Accordingly, we applied the provisions of APB No. 30, which required that the German subsidiaries’ net assets be recorded at their estimated net realizable value, which is equal to the amount of our estimate of net proceeds on the sale of the business. In applying these provisions, we recorded impairment charges totaling $45.9 million on our German specialized staffing services business in the third and fourth quarters of 2001 and $4.2 million during the second quarter of 2002. In conjunction with our reclassification of the German net assets and operations to continuing operations, these impairment charges have been reflected as a reduction of goodwill and included in income from continuing operations during their respective periods.

Valuation of deferred tax assets

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. Due to our historical operating losses, we have established a valuation allowance against all of our deferred tax assets.

Discontinued operations

In conjunction with our proposed merger, we have ceased separately marketing for sale our German specialized staffing services business. Accordingly, we have determined that our German specialized staffing services business will be treated as a continuing operation for the fiscal year ended December 31, 2002. In order to present consistent treatment for our results of operations for the fiscal years ended December 31, 2001 and 2000, we have reclassified our German specialized staffing operations from discontinued operations to continuing operations in our financial statements for such years.

Our financial statements were prepared using discontinued operations accounting for the divested US and European aviation and facility services and US and UK specialized staffing services businesses. Under discontinued operations accounting, we accrued estimates of our expected liabilities related to discontinued operations through their eventual discharge, which, in many cases, was expected to be several years in the future. At December 31, 2002, $18.0 million was recorded as the total liability remaining for the final settlement on the sale of the aviation and facility services businesses, in accordance with the settlement agreement effective April 12, 2002.

RESULTS OF OPERATIONS

We derive our marketing support services revenue primarily from three sources: (1) consumer promotion and fulfillment services, (2) trade promotion and fulfillment services and (3) retail merchandising services. Within our consumer promotion and fulfillment services operations, our call centers recognize revenue based on the number of calls and agents assigned, according to written pricing agreements. Our consumer and trade promotion and fulfillment services operations record revenue at the conclusion of the material selection, packaging and shipping process. Our retail merchandising services operations recognize revenue as services are rendered, based on contracted hourly billing rates. In general, we recognize revenues as programs are completed, services are rendered and/or as products are shipped in accordance with the terms of the contracts. Some of the contracts include postage and other items purchased by us as an agent on behalf of our client. For these items, we record the net billings to our customers as revenue.

Our specialized staffing services operations record revenue as services are rendered, based on contracted hourly billing rates.

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Cost of services represents the direct costs, consisting primarily of wages and related benefits, attributable to a specific contract, as well as certain related expenses such as workers’ compensation and other direct labor-related expenses.

Operating expenses represent primarily fixed expenses which support business operations, such as plant management, facility expenses (such as rent, utilities and communication costs), equipment leasing, maintenance, information technology expenses, sales, marketing, finance, human resources and divisional management.

Corporate general and administrative expenses include the cost of the corporate management team and corporate, legal, audit and outside service fees incurred to support and manage our operations and facilities.

The following table sets forth consolidated statements of operations data as a percentage of revenues for the periods indicated:

FISCAL 2002 COMPARED TO FISCAL 2001

Reported results of continuing operations for 2002 and 2001 include the marketing support services business and the German specialized staffing business. Results of continuing operations for 2001 also include the PIMMS store set-up business, which ceased operations during the first quarter of 2001. Discontinued operations for 2002

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include the divested UK specialized staffing business. Discontinued operations for 2001 include the divested UK specialized staffing services business and the divested US and European aviation and facility services businesses.

Revenues.    Consolidated revenues decreased $12.2 million, or 4%, to $264.6 million for fiscal 2002 from $276.8 million for fiscal 2001. Revenue from our marketing support services segment decreased to $127.6 million in 2002, from $141.3 million in 2001. Marketing support services revenues for fiscal 2001 included $0.9 million from the abandoned PIMMS operation. Revenue from our German staffing services operations increased marginally to $136.9 million for 2002, from $135.5 million in 2001. Sales in our marketing support services operations were negatively impacted in 2002 by the effect of the slow-down in the economy on our customers and the reduction in services outsourced to our merchandising services operations by a major retailer that is in bankruptcy proceedings.

Cost of Services.    Cost of services decreased $10.1 million, or 6%, to $149.0 million for fiscal 2002 from $159.1 million for fiscal 2001. As a percentage of revenues, cost of services decreased to 56.3% for 2002 from 57.5% for 2001. Cost of services for fiscal 2001 included $0.4 million for the abandoned PIMMS operation. Excluding the costs from PIMMS, cost of services decreased $9.7 million, or 6%. The decrease in cost of services is a result of the direct reduction in variable costs, including labor and related costs and material costs, associated with the reduction in sales between years from our marketing support services operations. This decrease was due primarily to labor and shipping cost reduction programs implemented across all of marketing support services.

Gross Margin.    Gross margin decreased $2.1 million, or 2%, to $115.6 million for fiscal 2002 from $117.7 million for fiscal 2001. As a percentage of revenues, gross margin increased to 43.7% for 2002 from 42.5% for 2001. Gross margin for fiscal 2001 included $0.5 million from the abandoned PIMMS operation. The decrease is due to the reasons discussed above.

Operating Expenses.    Operating expenses decreased $29.6 million, or 23%, to $100.1 million for fiscal 2002 from $129.7 million for fiscal 2001. As a percentage of revenues, operating expenses for fiscal 2002 decreased to 37.8%, from 46.8% in fiscal 2001. Operating expenses for fiscal 2001 included $0.5 million from the abandoned PIMMS operations. In addition, in the third and fourth quarters of 2001, due to the difficult economic environment, we performed a strategic review of marketing support services operations and recorded charges to operating expenses of $15.7 million for 2001. These charges consisted of $4.4 million for estimated uncollectible accounts receivable; $3.7 million for the estimated costs of buying out unattractive or redundant leases; $3.3 million for workers’ compensation claims, legal and other expenses related to the abandoned PIMMS operation; and $4.3 million for severance, legal, bonus and other costs associated with our efforts to streamline operations. We also recorded an additional charge of $2.9 million to reserve against an outstanding receivable for a customer in bankruptcy proceedings in the fourth quarter of 2001. Excluding the costs from the abandoned PIMMS operations and the identified additional charges, operating expenses decreased $10.5 million, or 9%. Approximately $0.9 million of the decrease can be attributed to cost savings gained in our marketing support services operations on lease, maintenance and utility costs from the consolidation of several warehouses into one new facility in late 2001, and to cost savings gained from initiatives implemented in early 2002 to reduce operating costs across all divisions. In addition, approximately $0.6 million of the decrease is due to the settlement of three legal disputes in the third and fourth quarters of 2002 for less than the amount reserved in 2001, with an additional $0.4 million of related legal fee expense reversed in the fourth quarter. Approximately $0.6 million of the decrease is due to the collection of amounts in 2002 which were charged against bad debt expense in the fourth quarter of 2000, in addition to a fourth quarter reversal of an over allowance of bad debt reserve of $0.2 million on a customer in bankruptcy proceedings. Approximately $0.5 million of the decrease is due to favorable settlements on facility and equipment lease terminations. Our German operations also implemented an operating cost reduction plan in early 2002, resulting in reduced headcount and related costs in all areas of operations. Excluding the effect of PIMMS and the special charges, as a percentage of revenues, operating expenses decreased to 37.8% for fiscal 2002 as compared to 40.0% for fiscal 2001.

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Corporate General and Administrative.    Corporate general and administrative expenses decreased $11.8 million, or 79%, to $3.1 million for fiscal 2002 from $14.9 million for fiscal 2001. As a percentage of revenues, corporate general and administrative expenses decreased to 1.2% from 5.4% in fiscal 2001. As part of the strategic review of operations during 2001, corporate general and administrative expenses for fiscal 2001 included charges of $10.3 million, consisting of $3.7 million to adjust the note receivable balance due from the sale of our US specialized staffing businesses to an estimated net realizable value; a charge of $3.3 million to expense various business development costs incurred which, based on the economic environment, would not be realized; lease charges of $0.8 million incurred in conjunction with the closing of the Atlanta corporate offices and $2.5 million of severance costs for twelve employees. Excluding these charges and the effect on revenue from PIMMS, corporate general and administrative expense decreased $1.5 million, or 33%, and as a percentage of revenues, these expenses decreased to 1.2% for fiscal 2002 as compared to 1.7% for fiscal 2001, due to cost savings in 2002 from reductions in personnel and occupancy costs from the closing of the Atlanta office.

Depreciation and Amortization.    Depreciation and amortization expense decreased $13.1 million, or 66%, to $6.6 million for fiscal 2002 from $19.7 million for fiscal 2001. As a percentage of revenues, depreciation and amortization expense decreased to 2.5% from 7.1% for 2001. As part of the strategic review of marketing operations during 2001, we recorded charges to depreciation and amortization expense of $6.4 million consisting of $2.9 million for various equipment and leasehold improvements at the facilities replaced during 2001 and $3.5 million for internally developed software which was replaced during 2001. Depreciation and amortization for fiscal 2001 included approximately $5.9 million of goodwill amortization expense which is no longer being amortized in accordance with SFAS No. 142. Excluding the charges and the amortization of goodwill, depreciation and amortization decreased $0.8 million, or 11%, and as a percentage of revenues, excluding the effect on revenues PIMMS, depreciation and amortization remained consistent between fiscal 2002 and fiscal 2001.

Impairment Charges.    Impairment charges in fiscal 2002 represent a write down of goodwill in the marketing support services business of $45.1 million recorded in the fourth quarter of 2002 under the annual goodwill impairment analysis performed pursuant to SFAS No. 142. We recorded a $4.2 million write down of goodwill on our German specialized staffing operations in the second quarter of 2002 resulting from the estimated loss on disposal of German operations in accordance with APB No. 30. In 2001, our German specialized staffing operations recorded impairment charges of $25.0 million in the third quarter and an additional $20.9 million in the fourth quarter to represent the then current estimate of the net realizable value of the business.

PIMMS Abandonment Costs.    PIMMS abandonment costs represent severance and other related costs on the abandonment of the PIMMS operation. We completed the closing of the PIMMS operation on March 16, 2001. We took a charge for the related severance expense of $2.5 million for 2001.

Operating Loss.    Operating loss was ($43.5) million for fiscal 2002 as compared to ($95.0) million for fiscal 2001. Operating loss for 2002 included a total of $49.3 million in impairment charges against goodwill. Operating loss for fiscal 2001 included impairment charges against goodwill of $45.9 million, special charges of $35.3 million incurred in the strategic review of marketing support services operations as discussed above, a $2.5 million charge for the abandoned PIMMS operation and $5.9 million of goodwill amortization expense. Excluding the charges, the abandoned PIMMS operation and the goodwill amortization, operating income was $5.8 million for 2002, compared to an operating loss of ($5.4) million in fiscal 2001. As a percentage of revenues, excluding the effect of the charges and PIMMS, operating income was 2.2% for fiscal 2002, compared to an operating loss of (1.9%) for fiscal 2001. The improvement was primarily a result of the cost saving initiatives implemented in both our marketing support services operations and our German specialized staffing services operations in 2002, as discussed previously.

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Interest Expense, Net.    Interest expense, net, represents the interest on our outstanding debt allocated to continuing operations. Net interest expense increased $4.4 million, or 57%, to $12.1 million for fiscal 2002 from $7.7 million for fiscal 2001, primarily due to the amortization of fees incurred in amending the Credit Facility in April 2002 and higher interest rates charged in fiscal year 2002. As a percentage of revenues, net interest expense was 4.6% for fiscal 2002 as compared to 2.8% for fiscal 2001.

Other Expense.    In fiscal 2002, other expense of $0.3 million includes losses incurred in the sale of a non-core marketing division and a note receivable, offset by a gain of $1.5 million on foreign currency translation. The total includes a $1.5 million loss on the May 2002 sale of a note receivable arising from the sale of the Company’s US staffing business in 2000. The note, with a book value of $5.0 million, was sold for $3.5 million, resulting in the $1.5 million loss. Also in May 2002, the sale of a non-core marketing division for approximately $0.6 million resulted in a loss on sale of $0.3 million. In fiscal 2001, a loss on foreign currency translation of $0.2 million was recorded.

Income Tax Benefit.    Income tax benefit was ($3.8) million for 2002 and ($4.0) million for fiscal 2001. Due to our net operating loss, we provided for income taxes at an annual rate of 35.0% in 2002 and 2001, reduced by a valuation allowance for all tax benefits in excess of net operating loss carry-backs. The 2002 income tax benefit is primarily due to German loss carry-backs for tax purposes and resulting refunds receivable.

DISCONTINUED OPERATIONS

On March 19, 2002, we sold our UK specialized staffing services business. On December 29, 2000, we sold our US and European aviation and facility services businesses. In accordance with the provisions of APB No. 30, we have reflected the results of our UK specialized staffing businesses and our US and European aviation and facility services businesses as discontinued operations in the consolidated balance sheets and statements of operations and cash flows. For all periods presented, this presentation reflects the net assets of these operations segregated from the assets and liabilities of continuing operations, and the earnings of these segregated from the results of continuing operations.

Income From Operations – UK Specialized Staffing Services Business.    Revenues were $18.8 million and $92.4 million for fiscal 2002 and 2001, respectively, for the UK specialized staffing business. Income from operations of $0.1 million for fiscal 2002 is net of $0.1 million of interest expense and an income tax benefit of ($2.0) million. Income from operations of $0.1 million for fiscal 2001 is net of interest expense of $1.0 million and an income tax provision of $0.9 million.

Loss on Sale of Businesses – UK Specialized Staffing Services Business.    On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. We recorded a charge of $9.4 million in the fourth quarter of 2001 to reduce the net assets of this business to their realizable value. We recorded a tax valuation allowance equal to the full amount of the tax benefit of this charge as the ultimate realization of these net operating loss carry-forwards was not assured.

Loss on Sale of Businesses – US and European Aviation and Facility Services Businesses.    On December 29, 2000, we sold our US and European aviation and facility services businesses for $185 million in cash to Securicor. The sale price for the US and European aviation and facilities services businesses was subject to post-closing adjustments based upon the 2001 actual performance of the businesses and a reconciliation of actual closing-date working capital to a target level of working capital. On April 12, 2002, we entered into a definitive settlement agreement with Securicor pursuant to which we agreed to pay Securicor $13.0 million with respect to the adjustments. Securicor also released us from all pending and potential indemnity claims related to the sale of the US and European aviation and facility services businesses, with limited exceptions. In connection with the settlement, we agreed to pay Mr. Frank Argenbright, the Chairman of our board of directors, $5.0 million to induce him to enter into the settlement agreement with Securicor. The agreement contained a release of the Company from certain claims asserted against the Company by Securicor and was conditioned

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upon a release by both the Company and Mr. Argenbright of certain claims against Securicor. Mr. Argenbright entered into his settlement agreement on April 12, 2002, simultaneously with our execution of a settlement agreement with Securicor. At December 31, 2000, we had recorded a total of $12.8 million for our estimated liability to Securicor. In the fourth quarter of 2001, we recorded an additional reserve of $5.2 million to accrue to the final settlement, which was then the subject of an agreement in principle with Securicor. In 2001, we also expensed $4.3 million for various costs related to the sale, including $2.0 million paid to Mr. Argenbright in satisfaction and termination of his performance bonus agreement, $1.0 million in estimated legal fees and $1.3 million in working capital adjustments. We recorded a related tax benefit of ($1.0) million.

NET LOSS

Net loss decreased $43.9 million to a loss of ($72.7) million for fiscal 2002 from ($116.6) million for fiscal 2001 due to the reasons discussed above.

FISCAL 2001 COMPARED TO FISCAL 2000

Reported results from continuing operations for 2001 and 2000 include the marketing support services business and the German specialized staffing business. Continuing operations also includes the PIMMS store set-up business which ceased operations during the first quarter of 2001. Discontinued operations for 2001 include the divested UK specialized staffing business and the divested US and European aviation and facility services businesses. Discontinued operations for 2000 include the divested US and UK specialized staffing services businesses and the divested US and European aviation and facility services businesses.

Revenues.    Revenues decreased $45.8 million, or 14%, to $276.8 million for fiscal 2001 from $322.6 million for fiscal 2000. Revenue from our marketing support services segment decreased to $141.3 million in 2001, from $193.3 million in 2000. Marketing support services revenue included $0.9 million and $36.6 million for 2001 and 2000, respectively, for the abandoned PIMMS operation. Revenue from our German staffing services operations increased to $135.5 million for 2001, from $129.3 million in 2000 primarily due to the additional revenue in 2001 from the operational branches that were added during 2000. Excluding PIMMS, revenues for fiscal 2001 decreased $10.1 million, or 4%. Compared to fiscal 2000, marketing support services revenues for fiscal 2001 were negatively impacted by three large one-time marketing promotion projects for three consumer product customers which were completed in May 2000. Sales were also negatively impacted by the decline in e-business, the effect of the slow-down in the economy on our customers and the reduction in services outsourced by a major retailer to our merchandising services division.

Cost of Services.    Cost of services decreased $21.4 million, or 12%, to $159.1 million for fiscal 2001 from $180.5 million for fiscal 2000. As a percentage of revenues, cost of services was 57.5% for fiscal 2001 and 55.9% for fiscal 2000. Cost of services for fiscal 2001 and 2000 included $0.4 million and $24.2 million, respectively, for the abandoned PIMMS operation. Excluding PIMMS, cost of services increased $2.4 million, or 2%. This increase was primarily the result of increased expenses in our German staffing operations to service the increased revenue between years. As a percentage of revenues, excluding PIMMS, cost of services increased to 57.5% for fiscal 2001 from 54.7% for fiscal 2000. This increase was due primarily to changes in business mix between marketing support services, which generally experiences higher margins, and our specialized staffing operations. In 2001, marketing support services comprised 51% of total revenues, a decrease from the 60% of total revenues that it contributed in 2000.

Gross Margin.    Gross margin decreased $24.4 million, or 17%, to $117.7 million for fiscal 2001 from $142.1 million for fiscal 2000. As a percentage of revenues, gross margin was 42.5% for 2001 and 44.1% for 2000. Gross margin for fiscal 2001 included $0.5 million from the abandoned PIMMS operation, while gross margin for 2000 included $12.4 million for the abandoned PIMMS operation. Excluding PIMMS, gross margin decreased $12.5 million, or 10%, and as a percentage of revenues, gross margin decreased to 42.5% for fiscal 2001 from 45.3% for fiscal 2000, due to the change in business mix as discussed above.

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Operating Expenses.    Operating expenses increased $6.1 million, or 5%, to $129.7 million for fiscal 2001 from $123.6 million for fiscal 2000. As a percentage of revenues, operating expenses increased to 46.8% for 2001 from 38.3% for 2000. Operating expenses for fiscal 2001 and fiscal 2000 included $0.5 million and $25.1 million, respectively, for the abandoned PIMMS operations. Due to the difficult economic environment, we performed a strategic review of marketing support services operations in the third and fourth quarters of 2001, and recorded charges to operating expenses of $15.7 million. These charges consisted of $4.4 million for estimated uncollectible accounts receivable; $3.7 million for the estimated costs of buying out unattractive or redundant leases; $3.3 million for workers’ compensation claims, legal and other expenses related to the abandoned PIMMS operation; and $4.3 million for severance, legal, bonus and other costs associated with our efforts to streamline operations. In the fourth quarter of 2001, we recorded an additional charge of $2.9 million to reserve against an outstanding receivable for a retail merchandising customer in bankruptcy proceedings. Excluding the charges and PIMMS, operating expenses increased $12.1 million, or 12%, and as a percentage of revenues, operating expenses increased to 40% for fiscal 2001 from 34.4% for fiscal 2000. Our German staffing operations experienced an increase in variable operating expenses to meet the increase in revenue between years. In our marketing support services operations, operating expenses increased due to an investment in new state-of-the-art facilities, the expansion of our customer contact operations, the expansion of our merchandising services national merchandiser infrastructure and the establishment of a vertical channel sales organization during 2001.

Corporate General and Administrative.    Corporate general and administrative expenses increased $7.4 million, or 99%, to $14.9 million for fiscal 2001 from $7.5 million for fiscal 2000. As a percentage of revenues, corporate general and administrative expenses increased to 5.4% from 2.3% in 2000. As part of the strategic review of operations performed during 2001, corporate general and administrative expenses for fiscal 2001 included charges of $10.3 million. These charges consisted of $3.7 million to adjust the note receivable balance due from the sale of our US specialized staffing businesses to an estimated net realizable value; a charge of $3.3 million to expense various business development costs incurred which, based on the economic environment, would not be realized; lease charges of $0.8 million incurred in conjunction with the closing of the Atlanta corporate offices and $2.5 million for severance costs for twelve employees. Excluding these charges and PIMMS, corporate general and administrative expense decreased $2.9 million, or 39%, and as a percentage of revenues, these expenses decreased to 1.7% for fiscal 2001 as compared to 2.6% for fiscal 2000, due to cost reductions taken during 2001.

Depreciation and Amortization.    Depreciation and amortization increased $7.2 million, or 58%, to $19.7 million for fiscal 2001 from $12.5 million for fiscal 2000. As a percentage of revenues, depreciation and amortization expense increased to 7.1% for 2001, from 3.9% for 2000. As part of the strategic review of marketing support services operations during 2001, we recorded charges to depreciation and amortization expense of $6.4 million, consisting of $2.9 million for various equipment and leasehold improvements at the facilities replaced during 2001 and $3.5 million for internally developed software which was replaced during 2001. Depreciation and amortization for fiscal 2000 included $2.2 million for the abandoned PIMMS operation. Excluding the charges and the abandoned PIMMS operation, depreciation and amortization increased $3.0 million, or 29%, and as a percentage of revenues, depreciation and amortization increased to 4.8% for fiscal 2001 from 3.6% for fiscal 2000. The increase was primarily due to the additional amortization in 2001 related to the ServiceAdvantage acquisition earn-out of $12.9 million paid on January 2, 2001, as well as additional depreciation expense from the significant leasehold improvements and equipment expenditures made in 2001 in conjunction with the move of the marketing support services operations into two new facilities in 2001.

Impairment Charges.    In 2001, our German specialized staffing services operations recorded an impairment charge against goodwill of $25.0 million in the third quarter, and an additional $20.9 million in the fourth quarter to represent the current estimate on the net realizable value of the business pursuant to APB No. 30. Impairment charges in fiscal 2000 represent the write off of the remaining goodwill of $60.2 million associated with the abandoned PIMMS operation.

PIMMS Abandonment Costs.    In December 2000, we committed to abandon operations of our PIMMS store set-up business unit, which we purchased in April 1999 for $65.0 million. A comprehensive strategic

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review of the unprofitable store set-up business indicated that the business did not meet criteria for continued investment. The store set-up business had become more project driven than anticipated with increasing surge capacity requirements and difficult-to-forecast utilization rates. To make the store set-up business profitable would have required significant additional investment to develop geographic density and maintain a national infrastructure. In 2001, PIMMS abandonment costs represent final severance costs for employees of the PIMMS operation. We completed the closing of the PIMMS operation on March 16, 2001, and took a charge for the related severance expense of $2.5 million. We recorded $6.5 million in impairment and other related costs in December 2000, which included: a write-off of assets, primarily computer systems which would no longer be utilized, of $2.6 million; severance and other related expenses paid during 2000 of $2.5 million; and the accrual for lease termination costs for the PIMMS facility of $1.4 million. In addition, we recorded, in operating expenses, $12.8 million in working capital adjustments related to the abandoned PIMMS operations, primarily for disputed accounts receivable.

Operating Loss.    Operating loss was ($95.0) million for fiscal 2001, an increase from the ($68.2) million operating loss for fiscal 2000. As a percentage of revenues, operating loss increased to (34.3%) for 2001 from (21.1%) for 2000. The operating loss for fiscal 2001 included charges of $35.3 million as discussed above, a $2.5 million charge for the abandoned PIMMS operation, and $45.9 million in impairment charges on our German operations. The operating loss for fiscal 2000 included a loss of $81.6 million for the abandoned PIMMS operation. Excluding the charges and the abandoned PIMMS operation, operating loss was ($11.3) million in fiscal 2001, as compared to operating income of $13.4 million in 2000. As a percentage of revenues, excluding the effect of the charges and the abandoned PIMMS operations, operating loss was (4.1)% for fiscal 2001, as compared to operating income of 4.7% for fiscal 2000, primarily as a result of the decrease in gross margin and the investment in operating facilities for our marketing support services divisions.

Interest Expense, Net.    Interest expense, net, represents the interest on our outstanding debt allocated to continuing operations. Net interest expense increased $0.7 million, or 10%, to $7.7 million for fiscal 2001 from $7.0 million for fiscal 2000. As a percentage of revenues, interest expense increased to 2.8% for 2001, from 2.2% for 2000. The increase in interest expense allocated to continuing operations was primarily due to the amendment fees incurred in 2001 for the extension of the Credit Facility.

Other Expense.    Other expense represents losses on foreign currency translation of $0.2 million for fiscal 2001 and 2000.

Income Tax Benefit.    Income tax benefit decreased $24.9 million to ($4.0) million for fiscal 2001 from ($28.9) million for fiscal 2000. We provided for income taxes at an annual rate of 35.0% in 2001, reduced by a valuation allowance for all tax benefits in excess of net operating loss carry-backs. We provided for income taxes at a rate of 35% for fiscal 2000.

DISCONTINUED OPERATIONS

On March 19, 2002, we sold our UK specialized staffing services business. On December 29, 2000, we sold our US and European aviation and facility services businesses. On October 13, 2000, we sold the assets of our US specialized staffing business. In accordance with the provisions of APB No. 30, we have reflected the results of our US and European aviation and facility services businesses and our US and UK specialized staffing businesses as discontinued operations in the consolidated balance sheets and statements of operations and cash flows. For all periods presented, this presentation reflects the net assets of these operations segregated from the assets and liabilities of continuing operations, and the earnings of these operations segregated from the results of continuing operations.

Income (Loss) From Operations – US and UK Specialized Staffing Services Businesses.    Revenues from the UK specialized staffing businesses were $92.4 million for fiscal 2001. Income from operations of

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$0.1 million for fiscal 2001 was net of interest expense of $1.0 million and income tax provision of $0.9 million. Revenues for fiscal 2000 consisted of $88.0 million from the UK specialized staffing businesses and $41.0 million from the US specialized staffing business. Income from operations of $7.5 million for fiscal 2000 included operating income of $5.1 million from the UK specialized staffing businesses and $2.4 million from the US specialized staffing business. Income from operations for fiscal 2000 was net of interest expense of $0.7 million and income tax provision of $4.2 million.

Loss From Operations – US and European Aviation and Facility Services Businesses.    Revenues from these businesses were $448.7 million for fiscal 2000. The loss from discontinued operations of ($5.8) million for fiscal 2000 was net of the applicable interest expense of $11.0 million and income tax benefit of ($3.8) million.

Loss on Sale of Businesses – US and UK Specialized Staffing Services Businesses.    On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. We recorded a charge of $9.4 million in the fourth quarter of 2001 to reduce the net assets of the UK business to their realizable value. We recorded a tax valuation allowance equal to the full amount of the tax benefit of this charge as the ultimate realization of these net operating loss carry-forwards is not assured. On October 13, 2000, we sold the assets of our US specialized staffing business to an investor group led by the former President of AHL’s Baltimore staffing operation for $22.5 million, which included notes receivable from the purchaser of $9.5 million, resulting in a loss of $1.7 million, net of tax benefit of ($1.2) million.

Gain on Sale of Businesses – US and European Aviation and Facility Services Businesses.    On December 29, 2000, we sold our US and European aviation and facility services businesses for $185 million in cash to Securicor. The sale resulted in a gain of $50.0 million, net of taxes of $30.1 million, on a net book value of assets and liabilities of $82.7 million, less disposal and transaction costs of $12.2 million and less a reserve for a possible downward purchase price adjustment of $10.0 million. The sale price for the US and European aviation and facilities services businesses was subject to post-closing adjustments based upon the 2001 actual performance of the businesses and a reconciliation of actual closing-date working capital to a target level of working capital. On April 12, 2002, we entered into a definitive settlement agreement with Securicor pursuant to which we agreed to pay Securicor $13.0 million with respect to the adjustments. Securicor also released us from all pending and potential indemnity claims related to the sale of the US and European aviation and facility services businesses, with limited exceptions. In connection with the settlement, we agreed to pay Mr. Frank Argenbright, the Chairman of our board of directors, $5.0 million to induce him to enter into the settlement agreement with Securicor. The agreement contained a release of the Company from certain claims asserted against the Company by Securicor and was conditioned upon a release by both the Company and Mr. Argenbright of certain claims against Securicor. Mr. Argenbright entered into his settlement agreement on April 12, 2002, simultaneously with our execution of a settlement agreement with Securicor. At December 31, 2000, we had recorded a total of $12.8 million for our estimated liability to Securicor. In the fourth quarter of 2001, we recorded an additional reserve of $5.2 million to accrue to the final settlement, which was then the subject of an agreement in principle with Securicor. In 2001 we also expensed $4.3 million for various costs related to the sale, including $2.0 million paid to Mr. Argenbright in satisfaction and termination of his performance bonus agreement, $1.0 million in estimated legal fees and $1.3 million in working capital adjustments. We recorded a related tax benefit of ($1.0) million.

NET INCOME (LOSS)

Net income (loss) decreased $120.0 million to a loss of $(116.6) million for fiscal 2001 as compared to income of $3.4 million for fiscal 2000 due to the reasons discussed above.

DIVESTITURES AND ABANDONMENTS

UK specialized staffing business

On March 19, 2002, we sold our UK specialized staffing services business for $29.5 million in cash. Net of transaction costs of $2.7 million, the sale yielded $26.8 million of proceeds, which were used to reduce

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outstanding debt. We recorded a charge of $9.4 million in the fourth quarter of 2001 to reduce the net assets of the UK business to their realizable value. The remaining net assets of discontinued operations of $1.5 million at December 31, 2002 include approximately $0.9 million for an income tax refund receivable and $1.1 million of an escrow relating to the sale proceeds, net of $0.5 million of accrued liabilities relating primarily to the remaining lease costs associated with the vacated UK administrative offices.

US and European aviation and facility services businesses

On December 29, 2000, we sold our US and European aviation and facility services businesses for $185 million in cash to Securicor. The sale resulted in a gain of $50.0 million, net of taxes of $30.1 million, on a net book value of assets and liabilities of $82.7 million, less disposal and transaction costs of $12.2 million and less a reserve for the possible downward purchase price adjustment of $10.0 million. Net after-tax proceeds were used to reduce debt. The sale price for the US and European aviation and facilities services businesses was subject to post-closing adjustments based upon the 2001 actual performance of the businesses and a reconciliation of actual closing-date working capital to a target level of working capital.

On April 12, 2002, we entered into a definitive settlement agreement with Securicor pursuant to which we agreed to pay Securicor $13.0 million with respect to the adjustments. Securicor also released us from all pending and potential indemnity claims related to the sale of the US and European aviation and facility services businesses, with limited exceptions. In connection with the settlement, we agreed to pay Mr. Frank Argenbright, the Chairman of our board of directors, $5.0 million to induce him to release certain claims he had asserted against Securicor in connection with his employment by Securicor. Securicor conditioned its agreement to the settlement upon a release of such claims.

Our obligation to pay Securicor the $13.0 million settlement payment is evidenced by two secured, subordinated promissory notes in the amounts of $10.0 million and $3.0 million. Our obligation to pay the $13.0 million settlement payment matures in two installments. The first installment, in the amount of $9.0 million, matured on April 12, 2003; the remaining installment of $4 million matures on October 12, 2003. We may prepay the notes at any time without premium or penalty. The notes are secured by a lien on substantially all of our assets and a lien on substantially all of the assets of our US subsidiaries. Our obligation to pay the settlement amount, and the lien securing our obligation, is subordinate to our obligation to pay all amounts outstanding or due pursuant to our existing Credit Facility and any substitute or replacement senior secured bank credit arrangement. We did not repay the $9.0 million installment of principal on the secured, subordinated promissory notes issued to Securicor that were due on April 12, 2003 because we had not repaid in full all amounts pursuant to our Credit Facility on such date. The notes bear interest at a rate of 7% per annum. Interest on the notes will accrue and be added to the principal until we repay or refinance the amounts outstanding under our Credit Facility, at which time interest on the notes will be payable quarterly. Our obligation to pay Mr. Argenbright $5.0 million is unsecured and does not bear interest. The obligation matures on October 12, 2003. However, we are not permitted to pay Mr. Argenbright the principal amount of the obligations prior to our repayment in full of all amounts outstanding under our Credit Facility and the termination of the Credit Facility and our payment in full of all amounts owing to Securicor.

At December 31, 2000, we had recorded a total of $12.8 million for our estimated liability to Securicor. In the fourth quarter of 2001, we recorded an additional reserve of $5.2 million to accrue to the final settlement. In 2001 we also expensed $4.3 million for various costs related to the sale, including $2.0 million paid to Mr. Argenbright in satisfaction and termination of his performance bonus agreement, $1.0 million in estimated legal fees and $1.3 million in working capital adjustments. We recorded a related tax benefit of ($1.0) million.

US specialized staffing services business

On October 13, 2000, we sold the assets of our US specialized staffing business to an investor group led by the former President of our Baltimore staffing operation for $22.5 million, which included notes receivable from

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the purchaser of $9.5 million, resulting in a loss of $1.7 million, net of tax benefit of ($1.2) million. Due to the economic downturn affecting the US specialized staffing industry, in 2001 we adjusted the net carrying value of the notes receivable balance to $5.0 million, taking an additional charge of $3.7 million recorded in corporate general and administrative expenses in the accompanying consolidated statements of operations. In 2002, the notes receivable were sold for $3.5 million, resulting in an additional $1.5 million loss recorded as other expense in the second quarter of fiscal 2002.

In accordance with the provisions of APB No. 30, we have reflected the results of our US and European aviation and facility services businesses and our US and UK specialized staffing businesses as discontinued operations in the accompanying consolidated balance sheets and statements of operations and cash flows. For all periods presented this presentation reflects the net assets of these operations segregated from the assets and liabilities of continuing operations, and the earnings of these businesses segregated from the results of continuing operations.

Abandonment

On December 28, 2000, we made the decision to abandon operations of our store set-up business unit, formerly called PIMMS. A comprehensive strategic review of the unprofitable store set-up business indicated that the store set-up business did not meet criteria for continued investment. The store set-up business had become more project-driven than anticipated with increasing surge capacity requirements and difficulties in forecasting utilization rates. To make the store set-up business profitable would have required significant additional investment to develop geographic density and maintain a national infrastructure. As a result of this decision, we recorded $66.7 million in impairment and other related costs in December 2000, including a write-off of goodwill of $60.2 million, a write down of assets, primarily computer systems which would no longer be utilized, of $2.6 million, severance and other related costs paid during 2000 of $2.5 million and the accrual for lease termination costs for the PIMMS facility of $1.4 million. In addition, we recorded, in operating expenses, $12.8 million in working capital adjustments related to the abandoned PIMMS operations, primarily for disputed accounts receivable. We completed the closing of the PIMMS business unit on March 16, 2001, and recorded a final charge for the related severance expense of approximately $2.5 million in 2001. The results of the PIMMS business are reflected within continuing operations from the date of acquisition, April 30, 1999, through the closing date in the accompanying consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $7.7 million in 2002, compared to a use of cash of $13.9 million in 2001. Operating activities in 2000 provided $30.2 million in cash. Operating activities of continuing operations provided $8.9 million in cash in fiscal 2002, while operating activities of discontinued operations used cash of $1.2 million. In 2002, net collections of income taxes refundable provided $10.3 million in cash, which was used to pay accounts payable and accrued expenses. In 2001, operating activities of continuing operations used cash of $6.9 million, while operating activities of discontinued operations used cash of $7.0 million. Increases in working capital provided sources of cash to pay income taxes in 2001. Operating activities of continuing operations provided cash of $20.0 million in fiscal 2000, while operating activities of discontinued operations provided $10.2 million of cash.

In 2002, investing activities provided $25.3 million of cash, primarily through the sales of the UK staffing business for net cash proceeds of $26.8 million, a note receivable from the sale of the US specialized staffing business for $3.5 million and a non-core marketing business for $0.6 million. Additions to property and equipment used $5.7 million of these proceeds. Cash used in investing activities was $35.1 million for fiscal 2001. Purchases of property and equipment were $15.1 million in fiscal 2001. We used $12.9 million in cash to pay the earn-out payment from our 1999 acquisition of ServiceAdvantage, and $7.1 million in cash to pay transaction expenses on the sale of our US and European aviation and facility services business. In fiscal 2000, investing activities provided cash of $141.7 million. The sale of our US specialized staffing services business

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provided $10.5 million in cash, and the sale of our US and European aviation and facility services business provided cash of $172.7 million. We used $17.3 million in cash for purchases of property and equipment. Cash paid for acquisitions of German specialized staffing businesses was $12.5 million in fiscal 2000, while cash paid for acquisitions of operations subsequently discontinued was $11.7 million in fiscal 2000.

In 2002, cash used in financing activities was $33.6 million, including net repayments on the Credit Facility of $31.5 million and payments of $2.1 million in debt issuance costs. Cash provided by financing activities was $35.1 million for fiscal 2001 For fical 2001, we received net borrowings under our Credit Facility of $38.4 million, offset by payment of expenses associated with amending the Credit Facility of $1.1 million. Also in fiscal 2001, we repurchased 260,000 shares of common stock for $2.3 million. For fiscal 2000, we made net payments on our Credit Facility of $143.8 million and repurchased 1,920,600 shares of our common stock for $17.7 million.

Capital expenditures

Capital expenditures were $5.7 million, $15.1 million and $17.3 million in fiscal 2002, 2001 and 2000, respectively. In fiscal 2001 we moved into two large state-of-the-art facilities in Rogers, Minnesota and Romulus, Michigan. In conjunction with these relocations, we incurred capital expenditures for leasehold improvements and equipment at these facilities. In addition, our German and UK specialized staffing services operations opened several branches in 2000 and early 2001. As a result, our capital expenditures for fiscal 2001 and 2000 were significantly higher than fiscal 2002.

Credit Facility

We obtain our working capital from borrowings pursuant to a Credit Facility (the “Credit Facility”) with a syndicate of commercial banks. Wachovia Bank, National Association is the Administrative Agent for the lenders. Our borrowings under the Credit Facility are secured by a lien on substantially all of our assets and the assets of our operating subsidiaries.

At December 31, 2001, we were not in compliance with a number of the covenants under the Credit Facility. On April 12, 2002, we reached agreement with our banks to amend the facility. The amendment eliminated the defaults, extended the maturity of the Credit Facility from April 15, 2002 to January 3, 2003, reduced the amount we are permitted to borrow, increased the interest rates that we are required to pay and modified our financial covenants. Under the amended agreement, at April 12, 2002, we were permitted to borrow up to $89.3 million.

We subsequently entered into additional amendments to the Credit Facility. Under the amendments, we are permitted to borrow up to $82.0 million. On March 28, 2003, in connection with the proposed merger, we obtained the consent of our senior secured lenders to further extend the maturity date under our credit agreement, which was scheduled to expire on March 31, 2003. As extended, the credit agreement will expire on August 29, 2003, unless the proposed merger is cancelled or an event of default occurs under the Credit Facility, in which event it will expire on the date the proposed merger is cancelled or an event of default occurs. At April 4, 2003, we had borrowings outstanding of $72.6 million under our Credit Facility.

In connection with the proposed merger, CGW is expected to obtain new financing arrangements to fund AHL’s operations following the proposed merger. Our existing Credit Facility will be repaid with proceeds from the new financing and then terminated. If the proposed merger is not consummated for any reason, our Credit Facility will expire on the date the proposed merger is cancelled. If the proposed merger is cancelled, management would attempt to negotiate with its lenders to extend the maturity of the Credit Facility. However, we cannot assure you that such negotiations, if required, will be successful. We also cannot assure you that we will be able to obtain any replacement credit facility or that other sources of liquidity will be available to us if the proposed merger is not completed and our Credit Facility is cancelled.

Under the Credit Facility, we are required to satisfy covenants relating to minimum consolidated adjusted EBITDA, fixed charge coverage ratios and limitations on capital expenditures, among others. We have monthly

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targets for each financial covenant that we must meet. We are required to maintain a monthly consolidated adjusted EBITDA that exceeds specified levels as set forth in the agreement. Our aggregate capital expenditures and disbursements relating to restructuring charges, as defined, from the period of November 1, 2002, through the end of each fiscal month ending July 2003 must not exceed the amounts specified in the terms of the agreement. Finally, we have monthly minimum fixed charge ratios which we must maintain. If we fail to comply with the covenants, we will be in default. Upon the occurrence of a default, unless our lenders grant a further waiver, we will not be permitted to borrow additional amounts under the Credit Facility, and the outstanding amounts will become immediately due and payable.

Going concern

Our consolidated financial statements have been prepared assuming that we will continue as a going concern. As described in our consolidated financial statements, we have $72.5 million in bank borrowings which are due no later than August 29, 2003; we had a net working capital deficit of approximately $77.9 million at December 31, 2002; and we have incurred recurring operating losses in recent years. Although the proposed merger, if completed as planned, would result in the retirement of a large portion of the debt and the recapitalization of the Company, there can be no assurance that such transactions will close as contemplated. If the proposed merger is terminated, management would attempt to negotiate with its lenders to extend the maturity of its Credit Facility. Furthermore, in such event, management will undertake additional efforts to raise capital and reduce costs. However, there can be no assurance that such negotiations, if required, will be successful. The consolidated financial statements do not include any adjustments to reflect the possible future effects on recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

CONTRACTUAL OBLIGATIONS

We are obligated to make future payments under various contracts we have entered into, including amounts pursuant to the Credit Facility, the settlement agreement with Securicor, equipment notes and non-cancelable operating lease agreements. Future contractual obligations related to these items at December 31, 2002 are as follows:

In connection with the proposed merger, the Company entered into a conditional amendment, dated March 28, 2003, to its chief executive officer’s employment agreement. According to the conditional amendment, if the proposed merger is consummated, the chief executive officer will be entitled to receive 1,900,000 restricted shares of AHL’s newly-created Series B participating preferred stock in lieu of the lump-sum cash payment of $2,500,000 which would be due to the officer upon a change in control of AHL.

The Company entered into an employment agreement with its chief financial officer on April 1, 2002 which upon a change of control before April 1, 2004, provides for a lump-sum payment of $500,000, which would be reduced to $250,000 if a change of control occurs after this date.

In addition to these costs, the Company has contracted for and expects to incur other customary costs associated with the proposed merger, such as financial advisor and fairness valuation services.

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INFLATION

We do not believe that inflation has had a material effect on our results of operations in the three year period ended December 31, 2002. However, there can be no assurance that our business will not be affected by inflation in the future.

RISK FACTORS

Certain statements made in this Annual Report on Form 10-K and other written or oral statements made by or on behalf of AHL may constitute “forward-looking statements” within the meaning of the federal securities laws. When used in this report, the words “believes,” “expects,” “anticipates,” “estimates” and similar expressions are intended to identify forward-looking statements. Statements regarding future events and developments and our 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. 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. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise, other than as required by law. Factors that could cause actual results to differ materially include, but are not limited to, those set forth below.

If we are unable to complete the proposed merger, our business will be adversely affected.

If the proposed merger is not completed, our business and our stock price will be adversely affected. CGW has not yet obtained financing commitments for the transaction, and we cannot assure you that they will be able to do so. If we are unable to complete the proposed merger, we may be unable to continue to operate our business. Costs related to the proposed merger, such as legal, accounting and financial advisor fees, must be paid even if the transactions are not completed. Our lenders have extended the maturity date of our Credit Facility to August 29, 2003. If the proposed merger is not completed for any reason, our Credit Facility will expire on the date the proposed merger is cancelled. If the proposed merger is cancelled, we would attempt to negotiate with our lenders to extend the maturity date. However, we cannot assure you that such negotiations would be successful. We cannot assure you that we will be able to obtain any replacement credit facility or that other sources of liquidity will be available to us if the proposed merger is not completed and our Credit Facility is cancelled.

We have entered into an amended Credit Facility under which we must satisfy certain financial and other covenants.

In connection with the proposed merger, we reached agreement with our banks to amend our Credit Facility. Among other things, the amendment extended the maturity date to the earlier of August 29, 2003 or the date the proposed merger is completed or cancelled, reduced the amount we are permitted to borrow and modified our financial covenants. Under the amended agreement, at March 28, 2003, we were permitted to borrow up to $82.0 million.

Although we have amended our Credit Facility and reduced our indebtedness over the last fiscal year, we still have substantial indebtedness. Our substantial indebtedness could have negative consequences for our business, including the following:

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Under the amended Credit Facility, we are required to satisfy covenants relating to minimum consolidated adjusted EBITDA, fixed charge coverage ratios and limitations on capital expenditures, among others. We have monthly targets for each financial covenant that we must meet. If we fail to comply with the covenants, we will be in default. Upon the occurrence of a default, unless our lenders grant a further waiver, we will not be permitted to borrow additional amounts under the Credit Facility, and the outstanding amounts will become immediately due and payable. Our borrowings under the Credit Facility are secured by a lien on substantially all of our assets and the assets of our operating subsidiaries.

We have experienced net losses.

We incurred net losses from continuing operations of $52.1 million for fiscal 2002. With the exception of the third quarter of 2002, we have had net losses from continuing operations for all quarters in 2002 and 2001. In addition, we anticipate that we will have a net loss from continuing operations for the first quarter of 2003. We cannot assure you that losses will not continue in the future. Consequently, as a result of these losses and due to the maturity date of our existing Credit Facility, the audit report to our Consolidated Financial Statements contains language regarding our ability to continue as a going concern.

Our stock price is volatile.

The market price of our common stock has been highly volatile and could be subject to wide fluctuations in response to quarterly variations in operating results, our success in implementing our business strategies, announcements of new contracts or contract cancellations, announcements of technological innovations or new products and services by us or our competitors, changes in financial estimates by securities analysts, or other events or factors. In addition, the stock market has experienced substantial price and volume fluctuations that have particularly affected the market prices of equity securities of many companies, and that have often been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock.

Since only a relatively small portion of our outstanding common stock is currently available for trading without restriction under Rule 144, and since our stock often trades at a relatively low volume level, any change in demand for our stock can be expected to substantially influence the market prices for our common stock. The price of our stock varied from a high of $3.35 to a low of $0.14 during 2002.

We depend on our labor force.

Our success is largely dependent on our ability to recruit, hire, train and retain qualified employees. Our business is labor intensive and continues to experience relatively high personnel turnover. Our operations generally require specially trained employees. Increases in our employee turnover rate could increase our recruiting and training costs and decrease our operating efficiency and productivity. The addition of new clients or implementation of new projects for existing clients may require us to recruit, hire and train personnel at accelerated rates. There can be no assurance that we will be able to successfully recruit, hire, train and retain sufficient qualified personnel to adequately staff for existing business or future growth. Additionally, since a substantial portion of our operating expenses consist of labor-related costs, increases in wages (including minimum wages as mandated by the US federal government, employee benefit costs, employment tax rates, and other labor-related expenses) could have a material adverse effect on our business, operating profit and financial condition. Furthermore, certain of our facilities are located in areas with relatively low unemployment rates, thus potentially making it more difficult and costly to hire qualified personnel.

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We depend on key management personnel.

We depend in large part on the abilities and continuing efforts of the officers and senior management within our marketing support services and our German specialized staffing services businesses. Our business and prospects could be materially adversely affected if our management team is not able to effectively manage our operations or if current officers and managers do not continue in their key roles. In order to support growth, we must effectively recruit, develop and retain additional qualified management personnel. We cannot assure you that in the future we will be able to recruit and retain additional qualified managers.

We are controlled by the Chairman of our board, our directors and our executive officers who beneficially own more than 51% of our common stock.

As of March 1, 2003, Frank A. Argenbright, Jr., our Chairman of the board, beneficially owned approximately 47.1% of our outstanding common stock. As a group, our executive officers and directors own approximately 51.3% of our stock. As a result, Mr. Argenbright and our executive officers and directors are able to control substantially all matters requiring action by our shareholders.

Our business relies on the trend toward outsourcing.

We believe there has recently been a significant increase in businesses outsourcing services not directly related to their principal business activities. Our business, results of operations and financial condition could be materially adversely affected if the outsourcing trend declines or reverses, or if corporations bring previously outsourced functions back in-house. Particularly during general economic downturns, businesses may bring previously outsourced functions in-house in order to avoid or delay layoffs.

We rely on a small number of clients for a significant portion of our revenues.

We focus on developing long-term relationships with large corporations and institutions. In 2002, our ten largest marketing support services clients accounted for approximately 40% of our marketing support services revenues, while our ten largest German specialized staffing clients accounted for approximately 36% of our German specialized staffing revenues. Our success depends substantially upon retaining our significant clients. We may lose clients due to a merger or acquisition, business failure, contract expiration, conversion to a competitor or conversion to an in-house system. We cannot guarantee that we will be able to retain long-term relationships or secure renewals of short-term relationships with our significant clients in the future. If we lose one or more of our largest clients, then our business, results of operations and financial condition could be materially adversely affected.

We do not have long-term contracts with many of our clients.

Though we have written agreements with many of our clients, we do not have written agreements with some of our major clients. We currently provide services to those clients pursuant to oral agreements. The written agreements that we have are generally terminable for cause and can often be terminated without cause on short notice. Many of our agreements do not assure specific volume or revenue levels. In addition, our contracts generally do not provide that we will be the client’s exclusive service provider.

We depend on certain client industries.

We derive our marketing support services revenue primarily from the automotive, consumer products, entertainment and retail industries. Our German specialized staffing services revenue is derived primarily from the light industrial, engineering, administrative, automotive and aerospace industries. Fundamental changes in the business practices of any of these client industries, whether due to regulatory, technological, or other developments, could cause a material reduction in demand by our clients for the services offered by us. Any reduction in demand could have a material adverse effect on our results of operations.

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Proposed German labor reforms may adversely affect our German specialized staffing business.

The German government recently enacted legislation that was designed to decrease unemployment through, among other things, the increased use of temporary staffing. This legislation contains various provisions that decrease the restrictions previously imposed on the temporary staffing market. The exception is that the legislation contains a requirement that, effective January 1, 2004, employees in temporary positions are to be paid according to “equal treatment”, i.e. the same wage and benefits that a permanent employee would receive in the same position at the contracting company, or alternatively, according to a collective bargaining agreement. If a collective bargaining agreement is not negotiated that provides for temporary employees to be paid at similar rates as reported in our historical operations, the implementation of this provision will increase our labor costs in Germany.

Our quarterly operating results may vary.

We have experienced and expect to continue to experience, quarterly variations in revenues and operating results as a result of a variety of factors, many of which are outside our control, including:

We may not be able to keep pace with changing technology.

The markets for our business process outsourcing services are subject to rapid technological changes and rapid changes in client requirements. This trend could adversely affect our business and financial results and result in the loss of clients and our ability to attract clients. While our Global Enterprise Management proprietary system is one of the most advanced in the industry, we cannot assure you that our competitors will not develop more sophisticated or cost-effective systems. We cannot assure you that we will be able to select, invest in and develop new and enhanced technology on a timely basis in the future in order to meet our clients’ needs and maintain competitiveness. We cannot guarantee that we will be successful in customizing products and services that incorporate new technology on a timely basis. Our failure to successfully and timely implement sophisticated technology or to respond effectively to technological changes would have a material adverse effect on our success, growth prospects, results of operations and financial condition.

We face competition in our industry.

The markets in which we operate are highly competitive. Management expects competition to persist in the future. Our competitors include small firms offering specific applications, divisions of large companies, large independent firms and in-house operations of our existing and potential clients. A number of competitors have or may develop financial and other resources greater than ours. Similarly, there can be no assurance additional competitors with greater name recognition and resources than us will not enter the markets in which we operate. Our performance and growth could be materially and adversely affected if our clients decide to retain in-house the services they currently outsource, or if potential clients retain or increase their in-house capabilities. A decision by our large clients to consolidate their outsourced services with a company other than ours would materially and adversely affect our business. Competitive pressures from current or future competitors could result in substantial price erosion, which could materially and adversely affect our business, results of operations and financial condition.

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We may suffer losses from business interruptions.

Our operations depend on our ability to protect our facilities, clients’ products, confidential client information, computer equipment, telecommunications equipment and software systems against damage from Internet interruption, fire, power loss, telecommunications interruption, e-commerce interruption, natural disaster, theft, unauthorized intrusion, computer viruses and other emergencies. While we maintain certain procedures and contingency plans to minimize the detrimental impact of such events, there can be no assurance such procedures and plans will be successful. In the event we experience temporary or permanent interruptions or other emergencies at one or more of our facilities that cause interruptions in our ability to meet our clients’ requirements, it could result in decreased revenues, net income and earnings per share. While we maintain property and business interruption insurance, it may not adequately and/or timely compensate us for all losses we may incur.

Further, some of our operations require timely and consistent access to telephone, Internet, e-commerce, e-mail, facsimile connections and other forms of communication 24 hours per day, seven days per week. We are substantially dependent upon telephone companies, Internet service providers and various telecommunications infrastructure to provide these forms of communication. If such communications are interrupted on a short or long-term basis, our services would be similarly interrupted and delayed.

Our marketing support services operations also rely on third-party carriers including United Parcel Service, Inc. and the United States Postal Service to ship and mail products from our distribution facility to purchasers. If our shippers experience interruptions from labor strikes or other events, our ability to distribute products could be impaired.

We face risks associated with general economic conditions.

We operate within US and international economies that are subject to various economic, market and other factors. We, as well as our clients, can be vulnerable to recession or other significant economic events or downturn. The US economy and related financial markets have generally experienced downward fluctuations in the past twelve months. Economic instability or continued downturn may continue for the foreseeable future. These broad economic factors can adversely affect our revenue.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

Our continuing operations include the German specialized staffing business. Our discontinued operations include the divested US and UK specialized staffing businesses and the divested US and European aviation and facility services businesses. Revenues from foreign operations are received, and operating costs are incurred, in foreign currencies (primarily the Euro). The denomination of foreign subsidiaries’ account balances in their local currency exposes us to certain foreign exchange rate risks. We address the exposure by financing most working capital needs in the applicable foreign currencies. We have not engaged in hedging transactions to reduce exposure to fluctuations in foreign currency exchange rates.

INTEREST RATE RISK

We maintain a Credit Facility which subjects us to the risk of loss associated with movements in market interest rates. Our Credit Facility had a balance outstanding at December 31, 2002 of $72.5 million, which was at a variable rate of interest. Our Credit Facility requires that we convert indebtedness outstanding in foreign currencies into dollars for purposes of determining the total amount of indebtedness outstanding. An increase in the value of a foreign currency relative to the dollar has the effect of reducing the amount we are otherwise permitted to borrow pursuant to the Credit Facility. We have not engaged in hedging transactions to reduce

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exposure to fluctuations in foreign currency exchange rates. Based on outstanding borrowings, it is estimated that an increase in the prevailing interest rate of 100 basis points would result in a decrease in net income of approximately $0.4 million, or $0.03 per share, for the year ended December 31, 2002.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements are listed under Item 15(a) of this Annual Report on Form 10-K and are filed as part of this report on the pages indicated. The supplementary data are included under Item 7 of this Annual Report on Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

On May 31, 2002, we decided to dismiss Arthur Andersen LLP (“Arthur Andersen”) as our independent public accountants, effective as of May 31, 2002. We appointed Ernst & Young LLP as our new independent public accountants, effective as of May 31, 2002. The decision to dismiss Arthur Andersen and to retain Ernst & Young LLP was approved by our board of directors upon the recommendation of our audit committee.

The audit reports of Arthur Andersen on our consolidated financial statements as of and for the fiscal years ended December 31, 2001 and 2000 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During our two fiscal years ended December 31, 2001, and the subsequent interim period through May 31, 2002, there were no disagreements between us and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersen’s satisfaction, would have caused them to make reference to the subject matter of the disagreements in connection with their reports.

None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K promulgated by the SEC occurred within our two fiscal years ended December 31, 2001 and 2000, and the subsequent interim period through May 31, 2002.

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PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, position and business experience for our directors and executive officers are described below.

A. Clayton Perfall was appointed Chief Executive Officer and director in October 2001. From January 2001 to September 2001, he was Chief Executive Officer of Convergence Holdings LLC, a private investment company. Mr. Perfall was Chief Financial Officer and a director of Snyder Communications, Inc., an international marketing company, from September 1996 to November 2000. Prior to that, he was with Arthur Andersen LLP for 15 years.

Heinz Stubblefield was appointed Chief Financial Officer on April 1, 2002. Prior to joining AHL, Mr. Stubblefield served as Senior Vice President and Chief Financial Officer of XM Satellite Radio, Inc., a company providing domestic satellite service directly to automobilies, since June 1998. From March 1996 to May 1998, he was Chief Financial Officer for WorldSpace International, a company providing satellite radio service internationally. From February 1993 to February 1996, Mr. Stubblefield was Corporate Controller for Next Software Corporation, a software and IT consulting company.

Steven D. Anderson has been with AHL since we purchased Archway, formerly known as Gage Marketing Services, in July 1998. He served as Vice President and Controller prior to being promoted to Vice President of Finance in late 1999. Prior to joining AHL, he spent six years with Gage Marketing Group. During his tenure with Gage Marketing Group, Mr. Anderson held positions in operations management and finance with responsibility for various operations of the consumer fulfillment business, and all Gage finance functions.

Debra McCreight has been with AHL since we purchased Archway, formerly known as Gage Marketing Services, in July 1998. Prior to joining AHL, she spent six years with Gage Marketing Group where Ms. McCreight was promoted from Director of Human Resources to Vice President of Human Resources.

Frank A. Argenbright, Jr. founded AHL Services in 1979. In connection with the sale of AHL’s US and European aviation and facility services businesses to Securicor plc in December 2000, Mr. Argenbright assumed the position of Chief Executive Officer of the US Security Operations of Securicor to facilitate the transition. Mr. Argenbright therefore resigned as AHL’s Chairman and Co-Chief Executive Officer and assumed the position of AHL’s Vice Chairman on December 29, 2000. In October 2001, upon completion of his services to Securicor, Mr. Argenbright was again elected Chairman of the Board. He previously served as AHL’s Chairman from 1979 until December 2000. In addition, Mr. Argenbright served as Co-Chief Executive Officer from 1994 until December 2000 and Chief Executive Officer from 1979 to 1994.

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John W. Ward has been a director of AHL Services since July 2000. Mr. Ward has served as Chairman of Transition International, Inc., a management consulting firm which he owns, since its formation in 1993. He is a member of the board of directors of Bullrun Financial and DA Group.

Wyck A. Knox, Jr. has been a director of AHL since November 2001. Mr. Knox has been a partner in the law firm of Kilpatrick Stockton LLP or its predecessor firms since 1976. He is also a director of AGL Resources, Inc., Air Serv Corporation and Thomson Oak Flooring Company and is a trustee of the University of Georgia Foundation. Mr. Knox is a general partner of Knox Properties, L.P. and is president of Knox Charity Fund, Inc.

Thomas V. Beard has been a director of AHL since March 2003. Mr. Beard has been a Managing Director in the Corporate and Executive Services Group of the Atlanta office of Deutsche Bank Alex Brown (“DBAB”), a global investment banking firm, since July 2000. Before joining DBAB, Mr. Beard was manager of the Atlanta office of Stephens Inc., an investment banking firm, from 1981 to 2000, where he promoted and directed the Stephens investment banking interests both nationally and internationally. Mr. Beard is a member of the board of directors of Children’s Healthcare of Atlanta, the University of Georgia’s Business School of Distinguished Practitioners and Camp Sunshine.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors and persons who beneficially own more than ten percent of our common stock to file with the Securities and Exchange Commission certain reports, and to furnish copies thereof to us, with respect to each such person’s beneficial ownership of our equity securities. Based solely upon a review of the copies of such reports furnished to us and certain representations of such persons, we believe that all filings were timely, except for one late Form 3 filing for Mr. Stubblefield concerning the grant of an option to purchase 250,000 shares of AHL common stock.

ITEM 11.    EXECUTIVE COMPENSATION

The following table sets forth, for the last three fiscal years, compensation information for our Chief Executive Officer and the other most highly compensated executive officers (the “Named Executive Officers”). We do not have a fifth Named Executive Officer as defined in Item 402 of Regulation S-K.

Summary Compensation Table

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The following table sets forth information regarding option grants during fiscal 2002 to each of the Named Executive Officers:

Option Grants in Fiscal 2002

During 2001, the Company filed a tender offer statement pursuant to which certain employees were offered the opportunity to exchange their existing options to purchase shares of common stock as granted under the Plan for new options to be granted under the Plan on or after July 1, 2002. The number of shares granted to employees was equal to the number of shares exchanged by the option holder. The exercise price of the new option was equal to the closing sale price of common stock as reported on the replacement grant date, or $5.00, whichever was greater. Under this program, options for the purchase of 185,000 shares of common stock were issued at an exercise price of $5.00 per share on July 10, 2002. Directors and Officers of the Company at the time of the filing of the tender offer were not eligible to participate in the exchange. Mr. Anderson and Ms. McCreight were not Named Executive Officers at the time of the filing, and therefore they were eligible to participate in the option exchange.

The following table details the option repricings for Mr. Anderson and Ms. McCreight.

Ten-Year Option/SAR Repricings