UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1998
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________
Commission File Number: 0-23054
HOSPITALITY WORLDWIDE SERVICES, INC.
(exact name of registrant as specified in its charter)
NEW YORK 11-3096379
- --------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
450 PARK AVENUE, SUITE 2603, NEW YORK, NY 10022
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(Address of principal executive offices) (Zip Code)
(212) 223-0699
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(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports 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.
(X) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUER
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date: 11,880,522 as of May 13, 1998.
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997..........................................3
Consolidated Statements of Operations for the three
months ended March 31, 1998 and 1997...........................4
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 1998...............5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and 1997 ........................6-7
Notes to Consolidated Financial Statements .................8-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations.................................................12-14
PART II. OTHER INFORMATION
Item 2. Changes in Securities ........................................15
Item 6. Exhibits and Reports on Form 8-K...........................15-16
Signatures..............................................................17
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995.
Except for historical information contained herein, the Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which involve certain risks and uncertainties. The
Company's actual results or outcomes may differ materially from those
anticipated. In assessing forward-looking statements contained herein, readers
are urged to carefully read those statements. When used in the Report on Form
10-Q, the words "estimate," "anticipate," "expect," "believe" and similar
expressions are intended to identify forward-looking statements.
2
HOSPITALITY WORLDWIDE SERVICES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
March 31, December 31,
1998 1997
---------- ------------
Unaudited
CURRENT ASSETS:
Cash and cash equivalents $9,407 $11,964
Marketable securities 4,970 18,916
Accounts receivable, less allowance for
doubtful accounts of $365 and $268 31,608 21,933
Current portion of note receivable -- 342
Costs and estimated earnings in
excess of billings 7,791 3,421
Advances to vendors 3,803 4,255
Prepaid and other current assets 4,862 1,037
------- -------
Total current assets 62,441 61,868
------- -------
Property and equipment, less accumulated
depreciation of $490 and $338 7,343 3,548
Goodwill and other intangibles, less
accumulated amortization of $1,755 and
$1,490 25,674 17,078
Deferred taxes 1,089 739
Other assets 1,347 1,035
------- -------
Total other assets 35,453 22,400
------- -------
$97,894 $84,268
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable and
capital lease obligations $ 679 $ --
Accounts payable 20,582 16,374
Accrued and other liabilities 3,515 2,540
Billings in excess of costs and
estimated earnings 148 296
Customer deposits 9,735 13,324
Income taxes payable 688 8
------- -------
Total current liabilities 35,347 32,542
Notes payable and capital lease
obligations, net of current portion 3,471 --
------- -------
Total liabilities 38,818 32,542
------- -------
STOCKHOLDERS' EQUITY:
Convertible preferred stock,$.01 par
value, $25 stated value, 3,000,000
shares authorized, 200,000 issued
and outstanding, $5,000,000
liquidation preference 5,000 5,000
Common stock, $.01 par value,
20,000,000 shares authorized,
11,868,022 and 11,345,572 shares
issued and outstanding 119 113
Additional paid-in capital 53,721 47,520
Retained earnings (deficit) 236 (907)
------- -------
Total stockholders' equity 59,076 51,726
------- -------
$97,894 $84,268
======= =======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
Three Months Ended March 31,
1998 1997
---- ----
Net revenues $ 41,290 $ 18,196
Cost of revenues 33,898 14,737
------ ------
Gross profit 7,392 3,459
Selling, general and administrative expenses 5,489 2,644
------ ------
Income from operations 1,903 815
------ ------
Other income (expense):
Interest income 364 6
Interest expense (145) (35)
------ ------
219 (29)
------ ------
Income before provision for income taxes 2,122 786
Provision for income taxes 904 389
------ ------
Net income $ 1,218 $ 397
====== ======
Basic earnings per common share $ 0.10 $ 0.04
====== ======
Diluted earnings per common share $ 0.09 $ 0.04
====== ======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,820 7,845
====== =====
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 13,977 9,684
====== =====
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(in thousands)
Unaudited
Preferred Stock Common Stock
------------------------------------------
Number Addt'l Retained Total
Number of Stated of Par Paid In Earnings Stockholders'
Shares Value Shares Value Capital (Deficit) Equity
------ ----- ------ ----- ------- --------- ------
BALANCE, JANUARY 1, 1998 200 $ 5,000 11,346 $ 113 $ 47,520 $ (907) $ 51,726
Exercise of stock options and warrants -- -- 8 -- 35 -- 35
Stock issued in connection with acquisition -- -- 514 6 6,166 -- 6,172
Net income -- -- -- -- -- 1,218 1,218
Preferred dividends -- -- -- -- -- (75) (75)
------------------------------------------------------------------------------------
Balance, March 31, 1998 200 $ 5,000 11,868 $ 119 $ 53,721 $ 236 $ 59,076
====================================================================================
The accompanying to consolidated financial statements notes are an integral part
of these statements.
5
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
Three Months ended
March 31,
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITES:
Net income $ 1,218 $ 397
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 416 263
Stock based compensation charge 122 --
Deferred income tax benefit (350) --
(Increase) decrease in current assets:
Accounts receivable (6,513) (2,506)
Notes receivable 342 --
Costs in excess of billings (4,370) (57)
Advances to vendors 452 (190)
Prepaid and other current assets (448) (159)
(Increase) in other assets (236) (82)
Increase (decrease) in current liabilities:
Accounts payable 2,661 409
Accrued and other liabilities (13) (107)
Billings in excess of costs (148) 323
Customer deposits (3,589) 74
Income taxes payable 680 42
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (9,776) (1,593)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short term marketable securities 13,946 --
Purchase price of subsidiary (1,500) --
Investment in ING Joint Venture (3,263) --
Cash acquired, upon acquisition,
net of acquisition costs (62) 689
Purchase of property and equipment (1,150) (211)
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 7,971 478
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan payable (6,300) 700
Proceeds from borrowings on loan payable 6,300 59
Repayment of notes payable and capital
lease obligations (787) (14)
Proceeds from exercise of stock options
and warrants 35 757
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (752) 1,502
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,557) 387
-------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,964 276
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,407 $ 663
======== ========
6
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 201 $ 307
Interest $ 152 $ 35
NON-CASH INVESTING & FINANCING ACTIVITIES:
Fair value (including goodwill) of net
assets acquired $ 6,232 $11,166
Stock issued for assets acquired $ 6,172 $11,953
The accompanying notes to consolidated financial statements are an integral part
of these statements.
7
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: CONSOLIDATION
The consolidated financial statements of Hospitality Worldwide Services, Inc.
and Subsidiaries (the "Company") and related notes thereto as of March 31, 1998
and for the three months ended March 31, 1998 and 1997 are presented as
unaudited, but in the opinion of management include all adjustments necessary to
present fairly the information set forth therein. These adjustments consist
solely of normal recurring adjustments. The consolidated balance sheet
information for December 31, 1997 was derived from the audited consolidated
financial statements included in the Company's Form 10-K. These interim
consolidated financial statements should be read in conjunction with that
report. The interim results are not necessarily indicative of the results for
any future period.
NOTE 2: ACQUISITIONS
In January 1997, the Company completed the acquisition of Leonard Parker Company
("LPC") and Parker Reorder Corporation ("Parker Reorder"). LPC, a leading
purchasing company for the hospitality industry, acts as an agent or principal
for the purchase of goods and services for its customers which include major
hotel and management companies worldwide. Parker Reorder has developed and is
marketing a new proprietary software product, Parker FIRST, which allows clients
to reorder operating supplies and equipment ("OS&E") and other products on-line
and will provide such clients with access to forecasting and product evaluation
capabilities. The purchase price of LPC and Parker Reorder, after final
adjustments, was approximately $11,650,000 which consisted primarily of
1,250,000 newly issued shares of Common Stock and $5 million stated value of
newly issued 6% convertible preferred stock of the Company, convertible, on a
formula basis, into not less 1,000,000 shares and no more than 4,000,000 shares
of common stock $.01 par value per share (the "Common Stock"), (at the present
stock price) from January 1, 1998 to January 10, 2000. The acquisition resulted
in goodwill of approximately $11,400,000, which is being amortized on a
straight-line basis over its estimated useful life of 30 years. The acquisition
was accounted for as a purchase with the results of LPC and Parker Reorder
included in the consolidated financial statements of the Company from the
acquisition date.
On January 9, 1998, the Company completed the acquisition of Bekins Distribution
Services, Inc. ("Bekins"), a leading provider of transportation, warehousing and
installation services to a variety of customers worldwide. Founded in 1969,
Bekins is a logistical services company that serves clients who are opening,
renovating or relocating facilities by assuring that materials, fixtures,
furniture and merchandise are moved from multiple vendor locations to their
ultimate destinations in a controlled orderly sequence so that each item can be
installed on schedule. The purchase price of Bekins of approximately $11,000,000
consisted of 514,117 shares of Common Stock and the assumption of certain
Bekins' debt. The purchase agreement contains a make-whole adjustment whereby,
on a formula-basis, additional shares will be transferred if the price of the
Company's common stock for the 20 days prior to the one year anniversary date is
less than 85% of the share price on the date of acquisition. The acquisition was
accounted for as a purchase with the results of Bekins included in the
consolidated financial statements of the Company from the acquisition date.
8
On February 9, 1998, the Company purchased the assets of the real estate
advisory business from Watermark Limited, LLC, an international management
company that is the general partner and manages Watertone Holdings LP, a
shareholder of the Company. The resulting wholly owned subsidiary of the Company
is named HWS Real Estate Advisory Group, Inc. ("HWS REAG"). The purchase price
of HWS REAG was $1,500,000 and their results are included in the consolidated
financial statements of the Company from the acquisition date.
On March 6, 1998, in conjunction with a joint venture formed with ING Realty
Partners ("ING Joint Venture"), the Company acquired the Clarion Quality Hotel
in Chicago, Illinois. A wholly-owned subsidiary of the Company will renovate and
refurbish this property pursuant to a contract with the ING Joint Venture, which
is expected to generate approximately $17 million of revenue for the Company in
1998.
NOTE 3: EARNINGS PER SHARE OF COMMON STOCK
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share," which replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share are very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
prior periods have been restated to conform to the new requirements.
Basic earnings per common share are based on net income less preferred stock
dividends divided by the weighted average number of common shares outstanding.
Diluted earnings per common share are adjusted to reflect the assumed conversion
of convertible preferred stock and the elimination of the preferred stock
dividends, if such conversion is dilutive, and the weighted average number of
common share equivalents from stock options and warrants.
NOTE 4: PRO FORMA INFORMATION
The following pro forma consolidated financial information has been prepared to
reflect the acquisition of the assets and business of Bekins. The pro forma
financial information is based on the historical financial statements of the
Company and Bekins, and should be read in conjunction with the accompanying
footnotes. The accompanying pro forma financial information is presented as if
the transaction occurred January 1, 1997. The pro forma financial information is
unaudited and is not necessarily indicative of what the actual results of
operation of the Company would have been assuming the transaction had been
completed as of January 1, 1997, and neither is it necessarily indicative of the
results of operations for future periods.
9
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
Three Months Ended
March 31, 1997
-------------------------------------------------------------------------
(amounts in thousands, except share data) (Unaudited)
Net Revenues $ 23,753
Net income $ 513
Basic earnings per common share $ .06
The above unaudited pro forma statements have been adjusted to reflect the
amortization of goodwill, as generated by the acquisition over a 30-year period,
additional income taxes on pro forma income and the 514,117 common shares issued
as consideration in the transaction. In addition, adjustments to reflect
historical compensation per employment agreements entered into at date of
acquisition have also been included.
NOTE 5: RECENT DEVELOPMENTS
On January 6, 1998, the Company reached an agreement in principle to enter into
a master development agreement with Prime Hospitality Corp. ("Prime") to develop
twenty hotel properties over a two-year period under the AmeriSuites brand name.
Under the proposed agreement, the Company will provide the site identification,
development, construction and purchasing services required for each project and
Prime will provide project design and management and franchise services once
each property is complete. The Company and Prime will be equally responsible for
the financing requirements (up to $30 million each) and will each have a 50%
interest in the new hotels.
NOTE 6: COMPREHENSIVE INCOME
In July 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a separate
financial statement. Comprehensive income generally includes net income as
reported by the Company adjusted for cumulative foreign translation adjustments
and unrealized gains and losses on marketable securities that are
available-for-sale, which are currently reported in the stockholders' equity
section of the balance sheet. The statement is effective for fiscal years
beginning after December 15, 1997. The Company has adopted the standard at the
beginning of 1998. The differences between net income as reported and
comprehensive income is immaterial for the three months ended March 31, 1998 and
1997.
NOTE 7: DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." This statement requires that the Company
report financial and descriptive information about its reportable operating
segments in financial statements issued to shareholders for interim and annual
periods. The Statement also establishes standards for related disclosures about
products and services, geographic areas and major customers. Under this
Statement, operating segments are components of an enterprise about which
separate financial information is available that is regularly evaluated by the
enterprise's chief operational decision-maker in deciding how to allocate
resources and in assessing performance. This statement is effective for fiscal
years beginning after December 15, 1997. The Company will conform with the new
standard as of December 31, 1998.
10
NOTE 8: YEAR 2000
In July 1996, the Emerging Issues Task Force reached a consensus, on Issue
96-14, "Accounting for the Costs Associated with Modifying Computer Software for
the Year 2000," which requires that costs associated with modifying computer
software for the year 2000 be expensed as incurred. Management has evaluated the
impact of Year 2000 issues on the Company's business and operations. The Company
believes, based upon its internal reviews and other factors, that future
external and internal costs to be incurred relating to the modification of
internal-use software for the year 2000 will not have a material effect on the
Company's results of operations or financial position.
NOTE 9: EARNINGS PER SHARE
The following table reconciles the components of basic and diluted earnings per
common share for the three months ended March 31, 1998 and 1997.
Three Months Ended
March 31,
1998 1997
---- ----
Numerator:
Net income $ 1,218,000 $ 397,000
Preferred stock dividends (75,000) (75,000)
------------ ------------
Basic earnings per common share -
Net income available to common stockholders 1,143,000 322,000
Effect of dilutive securities
Preferred stock dividends 75,000 75,000
------------ ------------
Diluted earnings per common share -
Net income available to common stockholders $ 1,218,000 $ 397,000
Denominator:
Basic earnings per common share -
Weighted average common shares outstanding 11,820,000 7,845,000
Effect of dilutive securities
Stock-based compensation plans 1,157,000 839,000
Preferred stock 1,000,000 1,000,000
------------ ------------
Diluted earnings per common share -
Weighted average common and
common equivalent shares outstanding 13,977,000 9,684,000
11
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS/OVERVIEW
From its inception in 1991 to August 1995, the Company's only source of revenues
was its decorative energy-efficient lighting fixture design, manufacturing and
installation business. The Company acquired its renovation business in August
1995 and disposed of its lighting business in February 1996. As part of its
strategy to further its position as one of the leading providers of services for
the hospitality industry on a global basis, the Company acquired its procurement
and reorder businesses in January 1997, its transportation, warehousing and
installation business in January 1998 and its real estate advisory business in
February 1998. As a result of this significant change in the Company's business
focus, period to period historical comparisons are not considered meaningful.
Additionally, historical comparisons are not considered meaningful because
revenue recognition methodologies vary across the Company's businesses. The
Company recognizes all revenues associated with a renovation, transportation,
warehousing or installation project on a percentage of completion basis. As part
of this process, the Company develops a complete scope of work to be performed
and invoices its clients on a monthly or bi-monthly basis as work is performed.
The Company's cost of services has been relatively stable over the past two
years. In contrast to the Company's recognition of renovation, transportation,
warehousing or installation revenues, the Company recognizes procurement
revenues in three ways: (i) when the Company is a principal, during which it
functions as a purchaser and reseller of products, the Company recognizes all
revenues associated with the products it purchases at the time of shipment of
the respective product, (ii) when the Company acts as an agent only, service fee
income is recognized as revenue at the time the service is provided and (iii)
when the Company provides these services under long-term contracts, earnings are
recognized under the percentage of completion method, based on efforts expended
over the life of the contract. In each case, the Company charges its clients a
procurement fee based upon the amount of time and effort it expects to spend on
a project. The Company intends to continue to expand its role as a purchaser and
reseller because the Company believes that it can enter into more advantageous
arrangements with its vendors when acting as principal rather than agent. Under
each method of procurement revenue recognition, profits primarily include only
procurement service fees. The Company realizes reorder and real estate advisory
revenue based on the fees it charges its clients for services rendered.
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1998 vs. THREE MONTHS ENDED
MARCH 31, 1997.
The Company experienced a significant increase in its net revenues to
$41,290,000 for the three months ended March 31, 1998 in comparison to
$18,196,000 for the three months ended March 31, 1997, due in large part to
increased revenues for the renovation and procurement businesses which have
increased over last year due to continued growth in their customer base,
attributed to increased sales and marketing efforts, and the further
establishment of the Company's name in the hospitality industry. In addition,
the acquisitions of Bekins and HWS REAG have contributed approximately
$6,100,000 to such revenues.
Cost of revenues for the three months ended March 31, 1998 were $33,898,000,
compared to $14,737,000 for the same period last year. This increase is due
mainly to the additions of Bekins and HWS REAG, which incurred costs of
approximately $4,500,000 for the three months ended March 31, 1998 and the
result of revenue growth. Gross profit, as a percent of
12
revenue was 17.9% for the three months ended March 31, 1998 as compared to 19.0%
for the same period last year.
Selling, general and administrative expenses for the period ended March 31, 1998
have increased to $5,489,000, compared to $2,644,000 for the same period last
year. Contributing to this increase are the acquisitions of Bekins and HWS REAG,
which incurred expenses of approximately $1,000,000 and an investment in the
infrastructure of the Company to support the revenue growth. Additionally,
selling, general and administrative expenses include $262,000 and $197,000 of
goodwill amortization for the periods ended March 31, 1998 and 1997,
respectively. As a percentage of net revenues, selling, general and
administrative expenses for the three months ended March 31, 1998 have decreased
to 13.3% from 14.5% for the same period last year. This reduction is the result
of greater economies of scale provided by growth and the acquisitions.
Interest income increased from $6,000 to $364,000 in the three months ended
March 31, 1998 due to the investment of the proceeds received from the Company's
public offering in September 1997. Interest expense increased in the three
months ended March 31, 1998 as compared to the same period last year due to the
acquisition of Bekins which carries approximately $4,000,000 of long-term debt.
The provision for income taxes for the three months ended March 31, 1998 was
$904,000, compared to $389,000 for the three months ended March 31, 1997. The
increase in the provision for income taxes was primarily due to an increase in
income before income taxes.
As a result of the above, net income for the three-month period ended March 31,
1998 was $1,218,000 compared to net income of $397,000 for the same period last
year.
13
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
In March 1998, the Company obtained a new unsecured line of credit with Marine
Midland Bank of New York, which provides the Company a maximum borrowing of
$7,000,000. Borrowings under the line of credit bear interest at the bank's
prime lending rate. Proceeds from the borrowing are utilized to fund short-term
cash requirements. At March 31, 1998, there were no outstanding borrowings under
the line of credit.
The Company's short-term and long-term liquidity requirements generally consist
of operating capital for its businesses and selling, general and administrative
expenses. The Company continues to satisfy its short-term and long-term
liquidity requirements with cash generated from operations and funds from a
public offering of its Common Stock in September 1997. Due to the nature of its
resources allocated to personnel for performance of its services, capital
requirements are insignificant.
Net cash used by operating activities was ($9,776,000) for the three months
ended March 31, 1998, compared to ($1,593,000) for the same period last year.
During the three months ended March 31, 1998, the Company's accounts receivable
and costs and estimated earnings in excess of billings increased due to revenue
growth and acquisitions. This increase was partially offset by an increase in
accounts payable. Customer deposits dropped from December 31, 1997 due to the
timing of several large projects at the Company's procurement business. The
additional accounts receivable at March 31, 1998 are expected to be collected in
full in 1998.
Net cash provided by investing activities for the three months ended March 31,
1998 was $7,971,000, compared to $478,000 for the three months ended March 31,
1997. The increase in cash provided is primarily the result of maturing
marketable securities which were used to fund operating activities offset by the
purchase of a subsidiary, HWS REAG, and the investment in the ING Joint Venture,
which purchased the Clarion Quality Hotel.
Net cash used by financing activities for the three months ended March 31, 1998
was $752,000 compared to net cash provided of $1,502,000 for the same period
last year. The primary financing use in the three months ended March 31, 1998
was the payment of subordinated debt held by Bekins at the date of acquisition.
The Company believes its present cash position, including increasing revenues
and cash on hand, and its ability to obtain additional financing as necessary,
will allow the Company to meets its short-term operating needs for at least the
next twelve months.
14
PART II. OTHER INFORMATION
Item 2. Changes in Securities
On January 9, 1998, the Company completed the acquisition of Bekins. The
purchase price of Bekins of approximately $11,000,000 consisted of 514,117
shares of Common Stock and the assumption of certain Bekins' debt. The purchase
agreement contains a make-whole adjustment whereby, on a formula-basis
additional shares will be transferred if the price of the Company's common stock
for the 20 days prior to the one-year anniversary date is less than 85% of the
share price on the date of acquisition.
The issuance of these shares of Common Stock is claimed to be exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
as a transaction not involving a public offering. There were no underwriting
discounts or commissions paid in connection with the issuance of any of these
shares.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of earnings per share (Incorporated herein by reference
to Note 9 to the Company's Consolidated Financial Statements).
27 Financial Data Schedule
(b) Reports on Form 8-K
JANUARY 23, 1998 THE FOLLOWING EVENT WAS REPORTED:
The Company filed a Form 8-K to report that the Company, HWS Acquisition Corp.
("Acquisition Corp"), Bekins and the sellers listed therein had entered into a
merger agreement pursuant to which Acquisition Corp., a wholly-owned subsidiary
of the Company, would merge with and into Bekins. The filing included the
Agreement and Plan of Merger by and among the Company, Acquisition Corp., Bekins
and the sellers named therein.
The following financial statements were filed with this report: None.
MARCH 24, 1998 THE FOLLOWING EVENT WAS REPORTED:
The Company filed Form 8-K/A to amend the filing of Form 8-K on January 23, 1998
to include the requisite financial statements of Bekins and the pro forma
financial information with respect to the Company's acquisition of Bekins.
The following financial statements were filed with this report:
Bekins Distribution Services Co., Inc.
Independent Auditor's Report.
Balance Sheets as of September 30, 1997 and 1996.
Statements of Operations for the years ended September 30, 1997 and 1996.
Consolidated Statement of Stockholders' Deficit for the years ended
September 30, 1997 and 1996.
Statements of Cash Flows for the years ended September 30, 1997 and 1996.
Notes to Financial Statements.
Hospitality Worldwide Services, Inc. Pro Forma Financial Information
Balance Sheet as of September 30, 1997 and January 9, 1998. Income Statement for
the nine months ended September 30, 1997. Income Statement for the year ended
December 31, 1996.
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APRIL 15, 1998 THE FOLLOWING EVENT WAS REPORTED:
The Company filed a Form 8-K/A to amend the filing of Form 8-K/A on
March 24, 1998 to include certain revised pro forma financial statements with
respect to the Company's acquisition of Bekins.
The following financial statements were filed with this report:
Hospitality Worldwide Services, Inc. Pro Forma Financial Information.
Balance Sheet as of September 30, 1997.
Income Statement for the nine months ended September 30, 1997. Income Statement
for the year ended December 31, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /S/ Robert A. Berman
--------------------------------------
ROBERT A. BERMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /S/ Howard G. Anders
--------------------------------------
HOWARD G. ANDERS
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER,
PRINCIPAL ACCOUNTING OFFICER) AND
SECRETARY
Dated: May 14, 1998
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