1
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, 2000
[ ] 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
HOTELWORKS.COM, 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)
201 ALHAMBRA CIRCLE, MIAMI, FL 33134
- ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(305) 774-3200
- ------------------------------------------------------------------------------
(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: 14,812,867 as of May 10, 2000.
2
HOTELWORKS.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999...........................................................................3
Consolidated Statements of Operations for the three
months ended March 31, 2000 and 1999............................................................4
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 2000................................................5
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 ...........................................................6
Notes to Consolidated Financial Statements ..................................................7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations..........................................................................................11-13
Item 3. Quantitative and Qualitative Disclosures about Market Risk.............................................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................................14
Item 6. Exhibits and Reports on Form 8-K.......................................................................14
Signatures.......................................................................................................15
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
3
HOTELWORKS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Mar 31, 2000 Dec 31, 1999
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,432 $ 4,560
Accounts receivable, less allowance for doubtful 33,550 28,301
accounts of $1,782 and $1,743
Costs and estimated earnings in excess of billings 303 276
Deposits with vendors 9,878 7,051
Income taxes receivable 3,913 3,907
Prepaid and other current assets 826 1,187
-------- --------
Total current assets 49,902 45,282
Property and equipment, net 5,241 5,195
Goodwill and other intangibles, net 10,938 11,038
Other assets 126 86
Non-current assets of discontinued operations 165 180
-------- --------
Total other assets $ 66,372 61,781
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts payable 21,141 21,248
Accrued and other liabilities 5,536 5,550
Billings in excess of costs and estimated earnings 166 142
Customer deposits 17,336 12,018
Current portion of long-term debt 2,776 2,902
Loans payable 15,835 15,835
Net current liabilities of discontinued operations 3,734 3,542
-------- --------
Total current liabilities 66,524 61,237
Long - term debt 39 68
-------- --------
Total liabilities $ 66,563 $ 61,305
-------- --------
STOCKHOLDER'S EQUITY
Convertible preferred stock, $.01 par value, $25
stated value, 5,000,000 shares authorized, none
issued and outstanding -- --
Common stock, $.01 par value, 50,000,000 shares
14,812,867 authorized, and 14,659,067 issued and
outstanding 148 147
Additional paid-in-capital 59,907 59,613
Retained earnings (deficit) (60,246) (59,284)
-------- --------
Total stockholder's equity (191) 476
-------- --------
Total liabilities and stockholder's equity $ 66,372 $ 61,781
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
4
HOTELWORKS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
Three Months Ended March 31,
2000 1999
-------- --------
Revenues $ 40,525 $ 56,859
Cost of revenues 37,379 52,660
-------- --------
Gross profit 3,146 4,199
Selling, general and adminstrative expenses 3,960 4,413
-------- --------
Loss from operations (814) (214)
-------- --------
Other income (expense):
Interest income 272 251
Interest expense (420) (424)
-------- --------
(148) (173)
-------- --------
Loss from continuing operations before (benefits) from income taxes (962) (387)
Income tax benefit -- (170)
-------- --------
Loss from continuing operations of discontinued operations (962) (217)
-------- --------
Discontinued operations:
Income from operations of discontinued operations -- 762
Loss on disposal on discontinued operations -- --
-------- --------
Income from discontinued operations -- 762
-------- --------
Net income (loss) $ (962) $ 545
======== ========
Basic earnings per common share:
Loss from continuing operations $ (0.07) $ (0.02)
Discontinued operations:
Income from discontinued operations -- 0.06
Loss on disposal -- --
-------- --------
Net income (loss) $ (0.07) $ 0.04
======== ========
Diluted earnings per common share:
Loss from continued operations $ (0.07) $ (0.02)
Discontinued operation:
Income from discontinued operations -- 0.06
Loss on disposal -- --
-------- --------
Net income (loss) $ (0.07) $ 0.04
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 14,777 13,293
======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 14,777 13,293
======== ========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
5
HOTELWORKS.COM, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
Preferred Stock Common Stock
------------------ ---------------------
Addt'l Retained Total
Number of Stated No. of Shares Par Paid in Earnings Stockholders'
Shares Value Outstanding Value Capital (Deficit) Equity
------ ----- ----------- ----- ------- --------- ------
BALANCE JAN 1, 2000 -- $-- 14,659 $147 $59,613 $(59,284) $ 476
Exercise of stock options -- -- 154 1 294 -- 295
Net loss -- -- -- -- -- (962) (962)
---- ---- ------ ---- ------- -------- -----
BALANCE MARCH 31, 2000 -- $-- 14,813 $148 $59,907 $(60,246) $(191)
==== ==== ====== ==== ======= ======== =====
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
6
HOTELWORKS.COM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
Unaudited
Three Months Ended March 31,
2000 1999
------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (962) $ (217)
Adjustments to reconcile net income to net cash used in operating activities
Depreciation and amortization 321 496
Income from operations of discontinued businesses -- 762
(Increase) decrease in current assets:
Accounts receivable, net (5,249) (5,141)
Costs and estimated earnings in excess of billings (27) (10)
Deposits with vendors (2,827) (4,160)
Income taxes receivable (6) --
Prepaid and other current assets 361 (182)
(Increase) in other assets (40) (225)
Increase (decrease) in current liabilities:
Accounts Payable (107) 1,290
Accrued and other liabilities (14) 1,397
Billings in excess of costs and estimated earnings 24 70
Customer deposits 5,318 6,367
Income taxes payable -- (176)
------- --------
NET CASH PROVIDED BY (USED IN)CONTINUING OPERATIONS (3,208) 271
------- --------
NET CASH PROVIDED BY (USED IN)DISCONTINUED OPERATIONS 207 (6,348)
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities -- 8,500
Purchase of property and equipment (267) (206)
------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS (267) 8,294
------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS -- 3,125
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings on loans payable -- 4,910
Repayment of long term debt (155) (172)
Proceeds from exercise of stock options and warrants 295 --
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 140 4,738
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,128) 10,080
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,560 2,179
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,432 $ 12,259
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income Taxes $ 30 $ 108
Interest $ 412 $ 304
NON-CASH INVESTING & FINANCING ACTIVITIES:
Preferred stock dividend accrued $ -- $ 45
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
7
HOTELWORKS.COM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: CONSOLIDATION
The consolidated financial statements of Hotelworks.com, Inc. and subsidiaries,
formerly known as Hospitality Worldwide Services, Inc. (the "Company") and
related notes thereto as of March 31, 2000 and for the three months ended March
31, 2000 and 1999 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. On
April 27, 2000 the Company filed a Form 8-K regarding the resignation of the
Company's independent certified public accountants(See Part II, Item 6(b)). The
Company is currently interviewing potential successor accountants. The
consolidated balance sheet information for December 31, 1999 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: DISCONTINUED OPERATIONS
In September, 1999, the Company announced a strategic initiative to reposition
the core supply and distribution businesses into a business-to-business
e-commerce company, and to divest itself of its renovation business and real
estate investment and asset management business. In December, 1998, the Company
decided to discontinue its hotel development business. As a result, for 1999,
the company has reflected the operating results associated with the divested
businesses, as well as the estimated losses on disposal, as discontinued
operations on the consolidated statements of operations. Results of these
operations, were as follows (in thousands):
THREE MONTHS ENDED
MARCH 31, 1999
------------------
Renovation Business:
Revenues $ 12,043
Income from operations, net of taxes $ 989
Real Estate Investment and Asset Management Business:
Revenues $ --
(Loss) from operations, net of taxes $ (217)
Total Discontinued Operations:
Revenues $ 12,043
Income from operations, net of taxes $ 762
The remaining assets and liabilities of the discontinued operations as of March
7
8
31, 2000 and December 31, 1999, as presented in the accompanying consolidated
balance sheets, are as follows: (in thousands):
March 31, 2000: REAL ESTATE
INVESTMENT HOTEL
RENOVATION ASSET MANAGEMENT DEVELOPMENT TOTAL
-------------------------------------------------------------------
Accounts receivable $23,479 $ -- $ -- $23,479
Allowance for doubtful accounts (20,904) -- -- (20,904)
Prepaids and other current assets, net 38 -- -- 38
Accounts payable (2,984) -- -- (2,984)
Accrued and other liabilities (2,363) (1,000) -- (3,363)
-------------------------------------------------------------------
Net current liabilities (2,734) (1,000) -- (3,734)
-------------------------------------------------------------------
Property and equipment, net 63 -- 32 95
Other assets 38 -- 32 70
-------------------------------------------------------------------
Net non-current assets $101 $ -- $64 $165
December 31, 1999: REAL ESTATE
INVESTMENT HOTEL
RENOVATION ASSET MANAGEMENT DEVELOPMENT TOTAL
-------------------------------------------------------------------
Accounts receivable $23,536 $ -- $ -- $23,536
Allowance for doubtful accounts (20,904) -- -- (20,904)
Prepaids and other current assets, net 753 -- -- 753
Accounts payable (3,428) -- -- (3,428)
Accrued and other liabilities (2,468) (1,000) (31) (3,499)
-------------------------------------------------------------------
Net current liabilities (2,511) (1,000) (31) (3,542)
-------------------------------------------------------------------
Property and equipment, net 74 -- 34 108
Other assets 38 -- 34 72
-------------------------------------------------------------------
Net non-current assets $112 $ -- $ 68 $180
-------------------------------------------------------------------
8
9
Net current liabilities of discontinued operations at March 31, 2000 and
December 31, 1999, include renovation accounts receivables and costs and
estimated earnings in excess of billings which include disputed change orders
and estimated net claims, which involve negotiations with customers and in some
cases may result in litigation. The Company believes that it has established
contractual or legal bases for pursuing recovery of disputed change orders and
claims and it is management's intention to pursue these matters and litigate, if
necessary, until a decision or settlement is reached. Disputed change orders and
claims involve the use of estimates and it is reasonably possible that revisions
to the estimated recoverable amounts could be made within the next year. The
settlement of these amounts depends on individual circumstances and negotiations
with the counter party, accordingly, the timing of the collection will vary and
may extend beyond one year.
The Company anticipates ceasing the remaining renovation operations in 2000.
However, the resolution date as to certain disputed receivables with customers
related to specific renovation projects which have been substantially completed
is uncertain. The Company anticipates disposing of its real estate investments,
and concurrently ceasing the real estate asset management and advisory
operations in 2000. The Company ceased its hotel development business in April,
1999.
NOTE 3: COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards 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. 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, 2000 and 1999.
NOTE 4: OPERATING SEGMENTS
The Company's operating segments are based on the separate lines of
business acquired over the past several years which provide different services
to the hospitality industry, namely purchasing, reorder and logistics services.
Due to the strategic repositioning of the Company's lines of business, the
Company has changed the composition of its reportable segments. The Company's
renovation business and real estate investment and asset management business
have been classified as discontinued operations (Note 2) and are no longer
reported as part of segment reporting. In addition, the previously reported
purchasing segment has been segregated into the purchasing business and the
reorder business. The Company has restated the prior years to conform to the
revised segment reporting. Segment data is as follows (in thousands):
Three months ended March 31,
2000 1999
------- -------
Sales to Customers:
Purchasing $30,550 $43,518
Reorder 4,579 2,409
Logistics 5,396 10,932
Corporate -- --
------- -------
$40,525 $56,859
======= =======
9
10
Inter-segment Sales:
Purchasing $ -- $ --
Reorder 758 1,480
Logistics -- --
Corporate -- --
------- -------
$ 758 $ 1,480
======= =======
Income(loss) from Operations:
Purchasing $ 623 $ 579
Reorder (486) (702)
Logistics (267) 1,063
Corporate (684) (1,154)
------- -------
$ (814) $ (214)
======= =======
The Company's revenue and assets predominately relate to the United States
operations, with immaterial amounts related to foreign operations.
For the three months ended March 31, 2000 and 1999, no customers accounted for
over 10% of the Company's revenues.
NOTE 5: EARNINGS PER SHARE
The following table reconciles the components of basic and diluted earnings per
common share for loss from continuing operations for the three months ended
March 31, 2000 and 1999 (in thousands).
Three Months Ended
March 31,
2000 1999
---- ----
Numerator:
Loss from continuing operations $ (962) $ (217)
Preferred stock dividends -- (45)
-------- ----------
Loss available to common shareholders
from continuing operations - basic (962) (262)
Effect of dilutive securities (45)
-------- ----------
Preferred stock dividends
Loss available to common shareholders
from continuing operations - diluted $ (962) $ (217)
Denominator:
Weighted average common shares
outstanding - basic 14,777 13,293
Effect of dilutive securities (a)
Stock-based compensation plans -- --
Preferred stock -- --
-------- ----------
Weighted average common and
common equivalent shares
outstanding - diluted 14,777 13,293
(a) Antidilutive
10
11
HOTELWORKS.COM, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2
DESCRIPTION OF BUSINESS
OVERVIEW
The Company believes that historical comparisons of revenue levels, gross profit
levels and gross profit percentages may not be meaningful on a period to period
basis because revenue recognition methodologies vary across the Company's
businesses. The Company recognizes revenues and the associated earnings of fixed
fee service contracts under the percentage of completion method. Under this
method, the Company recognizes earnings relating to the portion of the total
earnings anticipated from a contract which the efforts expended bears to the
estimated efforts over the life of the contract. Earnings for variable fee
service contracts are generally recognized upon completion of the associated
service. In addition, in the purchasing and reorder business, the Company
performs its services either acting as a principal, for which it functions in a
manner similar to a purchaser and reseller of merchandise, or as an agent. As an
agent, revenues include solely the service fee income and the cost of the
contracts includes labor and other direct costs associated with the contract and
those indirect costs related to contract performance. As a principal, the
revenues and costs of contracts also include the cost of the associated
merchandise purchased for the customer, which are recognized when the
merchandise is shipped directly from the vendor to the customer.
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 2000 vs. THREE MONTHS ENDED
MARCH 31, 1999.
Revenues for the three months ended March 31, 2000 decreased to $40,525,000 as
compared to $56,859,000 for the three months ended March 31, 1999. The decrease
in revenues was concentrated in two business lines, logistics and purchasing.
For logistics, significant revenue was recorded in the first quarter of 1999 on
a large one-time contract that did not repeat in 2000. For the purchasing
business, the drop in revenue was partly the result of the timing in shipments
on projects where the Company acts as a principal. Projects that were expected
to ship in the first quarter of 2000 were postponed until later in 2000.
Additionally, shipments on several large contracts were concentrated in the
first quarter of 1999.
Cost of revenues for the quarter ended March 31, 2000 decreased to $37,379,000
as compared to $52,660,000 for the first quarter of 1999 due primarily to the
lower revenues.
Gross profit for the three months ended March 31, 2000 was $3,146,000 or 7.8% of
revenues, compared to $4,199,000 or 7.4% of revenues for the same period last
year. The decrease in gross profit dollars was due to the drop in revenues.
Selling, general and administrative ("SG&A") expenses decreased from $4,413,000
in the three months ended March 31, 1999 to $3,960,000 in the current year's
quarter. The decrease was primarily the result of the consolidation of offices
accomplished in 1999 and the related reduction in administrative and corporate
headcount. SG&A expenses include $100,000 and $156,000 of goodwill amortization
for the periods ending March 31, 2000 and 1999, respectively. As a percent of
revenue, SG&A expenses have increased from 7.8% in last year's first quarter to
9.8% in the current quarter primarily due to the decrease in revenue.
The loss from operations for the quarter ended March 31, 2000 was $814,000
compared to a loss of $214,000 for the quarter ended March 31, 1999. The
increase in the loss in the current quarter was due to the factors cited above.
11
12
Interest expense was basically unchanged between the quarters due to an
insignificant change in the level of long-term debt for these periods. Interest
income rose slightly in the current quarter when compared to the same period
last year.
Due to the losses sustained in the three months ended March 31, 2000 and the
lack of any additional carryback opportunity, no provision or benefit for income
taxes was recorded. The amounts recorded as a benefit in the first quarter of
1999 represents a current benefit for a carryback claim for federal, state and
local income taxes.
Based on the above factors, the loss from continuing operations increased from a
loss of $217,000 in the three months ended March 31, 1999 to a $962,000 loss in
the current three month period. Basic loss per share from continuing operations
increased from a $0.02 loss in last year's first quarter to a loss of $0.07 in
the current quarter.
The operating results associated with the discontinued operations reflect income
of $762,000 in the quarter ended March 31, 1999 primarily due to income earned
by the renovation business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The liquidity of
the Company was severely affected during 1999 by significant losses from
continuing operations and discontinued operations. In addition, certain of the
Company's debt and line of credit facilities are in default and the Company
projects negative cash flows from operations in 2000. These circumstances raise
substantial doubt about the Company's ability to continue as a going concern.
The Company's term loan and mortgage note payable were in default as of March
31, 2000 and the Company's unsecured line of credit facilities, which matured in
September 1999, were not repaid and are currently in default (See Part II, Item
1, Legal Proceedings). Accordingly, all of these debt facilities are currently
due and payable. However, interest on all loans is being paid monthly at the
contractual rate. The Company anticipates selling a warehouse facility, the
proceeds of which will be used to repay the term loan and mortgage note payable.
The Company is also involved in active, on-going negotiations with the banks who
provided the line of credit facilities as to a refinancing of the facilities or
an extension of the expiration date. There are no assurances that the Company
will be able to successfully negotiate these facilities at terms favorable to
the Company.
The Company's 2000 budget projects a net cash flow deficit from operations of
approximately $1.4 million and cash requirements related to the development of
its Internet web-based reorder system of approximately $1.9 million. The net
cash flow deficit from operations for 2000 primarily relates to continued losses
of the Parker Reorder business and corporate expenses. Management believes that
given its working capital position (exclusive of short-term debt obligations) as
of March 31, 2000 of $2.0 million, including anticipated tax refunds of
approximately $3.9 million relating to the Company's ability to carryback
current year tax losses to prior years for federal, state and local tax
purposes, their review of the on-going businesses' gross margins and related
expenses, and their ability to defer certain capital expenditures and other
current payment obligations, if necessary, that sufficient funds will be
available to cover operating cash flow deficits in 2000, but will not be
sufficient to repay the debt obligations of the Company which are currently in
default. Accordingly, there are no assurances that the Company will have
sufficient funds available to it to satisfy all of its obligations during 2000.
12
13
Net cash used in operating activities of continuing operations was $3,208,000
for the three months ended March 31, 2000 compared to net cash provided of
$271,000 for the three months ended March 31, 1999. In the current quarter, cash
used by an increase in accounts receivable and vendor deposits exceeded cash
generated from customer deposits.
Net cash provided by operating activities of discontinued operations was
$207,000 for the first quarter of 2000 as compared to net cash used of
$6,348,000 for the first quarter of 1999.
Net cash used in investing activities of continuing operations for the three
months ended March 31, 2000 was $267,000 compared to net cash provided of
$8,294,000 for the three months ended March 31, 1999. The primary source of
investing cash for the 1999 quarter was the sale of marketable securities.
For discontinued operations, net cash provided by investing activities for the
current quarter was $0, compared to net cash provided of $3,125,000 for the
first quarter of 1999. In 1999, the Company received a repayment of a mortgage
receivable.
Net cash provided by financing activities of continuing operations was $140,000
for the three months ended March 31, 2000 as compared to net cash provided of
$4,738,000 for the three months ended March 31, 1999. The primary financing
source for 1999 was borrowings under the Company's lines of credit.
The American Stock Exchange ("Exchange") has advised the Company on an informal
basis that the Company has fallen below the threshold requirements for listing
on the Exchange. Representatives of the Company and the Exchange will be meeting
to determine whether the Company will be able to satisfy those requirements or
obtain a waiver of the requirements that it does not satisfy. The Exchange may
then commence proceedings to delist the Company's securities. The Company will
have an opportunity to oppose any such delisting through administrative
procedures. If the Company's securities are delisted, its ability to raise
capital and the liquidity of its securities would be adversely affected.
INFLATION
Inflation and changing prices during the current year did not significantly
affect the major markets in which the Company conducts its business. In view of
the moderate rate of inflation, its impact on the Company's business has not
been significant.
YEAR 2000
The Year 2000 issue resulted from computer programs and circuitry that do not
differentiate between the year 1900 and the year 2000 because they were written
using two- rather than four-digit dates to define the applicable year. If not
corrected, many computer applications and date-sensitive devices could have
failed or created erroneous results before, on or after January 1, 2000. The
Year 2000 issue affected virtually all companies and organizations, including
the Company.
During 1999, the Company developed and implemented a plan to assure Year 2000
readiness to avoid significant Year 2000 failures. The Company completed its
implementation and testing of its plan in November, 1999 and to-date in 2000 has
experienced no significant Year 2000 failures, either in its own computer
operations or those of its major customers or vendors. The Company also does not
anticipate any material Year 2000 failures going forward.
13
14
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Although the Company does maintain offices outside the United States and does
conduct certain transactions in foreign currencies, the Company does not believe
that it has material exposure to risks associated with foreign currency
fluctuations related to its operations given the terms of its contracts with
customers. The Company does not use derivative financial instruments in its
operations. The Company does have exposure to market risks associated with
changes in interest rates given that the Company does maintain lines of credit
and long-term debt facilities which have variable interest rates.
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On April 19, 2000, Bank of America, N.A. filed an action against the Company in
the Circuit Court of the County of St. Louis, State of Missouri, seeking to
recover the unpaid principal of a promissory note, together with interest
thereon and related costs, in the approximate aggregate amount of $6,000,000.
The Company is negotiating a restructuring of its loan with Bank of America and
has not yet retained counsel to defend the action. If Bank of America obtains a
judgment against the Company in the amount sought, the Company will not be able
to satisfy the judgment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of earnings per share (Incorporated herein by reference to
Note 5 to the Company's Consolidated Financial Statements).
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K dated April 27, 2000, filed with the Commission on April 27,
2000, reporting Item 4, changes in Registrant's Certifying Accountant.
14
15
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.
/s/ DOUGLAS A. PARKER
----------------------------------------------
Douglas A. Parker
Acting Chief Executive Officer, President
and Director
/s/ JOHN F. WILKENS
----------------------------------------------
John F. Wilkens
Vice President - Treasurer (principal
financial officer, principal accounting officer
Dated: May 15, 2000
15