SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File Number: 0-27494
LEISUREPLANET HOLDINGS, LTD.
- --------------------------------------------------------------------------------
(Exact name of Registrant as Specified in Its Charter)
Bermuda Not Applicable
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
Clarendon House, Church Street, Hamilton HM CX, Bermuda
(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number, Including Area Code: 809-295-1422
First South Africa Corp., Ltd.
- --------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of May 11, 1999 was
5,159,706.
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Balance Sheets at March 31, 1999 and
June 30, 1998....................................................3
Unaudited Consolidated Statements of Income for the three months
and for the nine months ended March 31, 1999 and 1998............5
Unaudited Consolidated Statements of Cash Flows for the nine
months ended March 31, 1999 and 1998.............................7
Unaudited Consolidated Statement of Changes in Stockholders'
Investment for the period June 30, 1998 to March 31, 1999........8
Notes to the Unaudited Consolidated Financial Statements........9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................17
Item 3. Quantitative and Qualitative Disclosures About Market Risk......30
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on 10-K...................................31
Signatures...............................................................32
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<PAGE>
LEISUREPLANET HOLDINGS, LTD.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, JUNE 30,
1999 1998
$ $
-------- -------
<S> <C> <C>
CURRENT ASSETS
Cash on hand 21,316,901 17,948,991
Trade accounts receivable 17,339,080 16,871,292
Less: Allowances for bad debts (471,089) (833,785)
------------- ------------
16,867,991 16,037,507
Inventories (net) 10,045,538 11,742,613
Prepaid expenses and other current assets 5,902,745 1,711,428
----------- -----------
TOTAL CURRENT ASSETS 54,133,175 47,440,539
Property, plant and equipment 30,400,058 31,410,837
Less: Accumulated depreciation (11,851,867) (11,423,572)
------------ ------------
18,548,191 19,987,265
Intangible assets (net) 29,131,476 20,045,983
Deferred charges (net) 940,593 1,448,199
Other assets 399,438 261,735
-------------- ------------
103,152,873 89,183,721
</TABLE>
-3-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
MARCH 31, JUNE 30,
1999 1998
$ $
--------- -------
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft payable 2,360,919 2,787,965
Current portion of long term debt 901,999 2,256,275
Trade accounts payable 9,157,201 9,205,092
Other provisions and accruals 5,176,009 4,506,770
Dividends payable - 558,185
Other taxes payable 402,352 1,064,432
Income tax payable 1,418,838 1,790,874
------------ ------------
TOTAL CURRENT LIABILITIES 19,417,318 22,169,593
Long term debt 34,867,794 28,945,426
Deferred income taxes 777,666 529,405
------------ ------------
55,062,778 51,644,424
STOCKHOLDERS' INVESTMENT
Capital stock:
A class common stock, $0.01 par value - authorized 23,000,000 51,906 56,492
shares, issued and outstanding 5,274,749 shares (June 1998:
5,649,224 shares)
B class common stock, $0.01 par value - authorized 2,000,000 9,466 18,223
shares, issued and outstanding 946,589 shares (June 1998:
1,822,500 shares)
FSAH B Class common stock 580 539
FSAH Redeemable preferred stock, $.01 par value, authorized 9,891 -
and issued 60,000,000 shares
Capital in excess of par 36,983,538 28,288,404
Retained earnings (5,031,773) 7,209,977
------------ -----------
32,023,608 35,573,635
Minority stockholders investment 31,604,385 19,677,124
------------ -----------
63,627,993 55,250,759
Foreign currency translation adjustments (15,537,898) (17,711,462)
------------ -----------
48,090,095 37,539,297
103,152,873 89,183,721
============ ===========
</TABLE>
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<PAGE>
LEISUREPLANET HOLDINGS, LTD.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
$ $
---- ----
<S> <C> <C>
Revenues 24,591,506 28,218,692
========== ===========
Operating expenses
Cost of sales 15,391,288 16,536,884
Selling, general and administrative costs 10,628,392 9,732,843
---------- -----------
26,019,680 26,269,727
Operating income (1,428,174) 1,948,965
Other income 746,540 370,949
Interest income/( expense) (610,491) (163,901)
---------- -----------
Income from consolidated companies before income taxes (1,292,125) 2,156,013
Provision for taxes on income (318,299) (688,855)
---------- -----------
(1,610,424) 1,467,158
Minority interest in consolidated subsidiary companies (855,696) (549,443)
---------- -----------
Net income before extraordinary charges (2,466,120) 917,715
Extraordinary loss on restructure of group - -
Provision for loss on share price warranty - -
Retrenchment cost provision - -
----------- -----------
Net (loss)/income (2,466,120) 917,715
=========== ===========
Basic (loss)/earnings per share (0.40) 0.13
Fully diluted (loss)/earnings per share (0.21) 0.13
Weighted average number of shares outstanding
Basic (loss)/earnings per share 6,137,231 7,073,170
Fully diluted (loss)/earnings per share 8,657,696 10,599,000
</TABLE>
-5-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME FOR
THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
$ $
---- ----
<S> <C> <C>
Revenues 82,807,084 85,770,957
============ ===========
Operating expenses
Cost of sales 52,520,280 52,308,927
Selling, general and administrative costs 28,179,333 27,475,571
------------ -----------
80,699,613 79,784,498
Operating income 2,107,471 5,986,459
Other income 1,041,806 1,005,860
Interest income/( expense) (1,175,922) 93,756
------------ -----------
Income from consolidated companies before income taxes 1,973,355 7,086,075
Provision for taxes on income (1,752,478) (1,926,674)
------------ -----------
220,877 5,159,401
Minority interest in consolidated subsidiary companies (2,369,370) (1,708,678)
------------ -----------
Net income before extraordinary charges (2,148,493) 3,450,723
Extraordinary loss on restructure of group (4,585,659) -
Loss on share price warranty (5,007,596) -
Retrenchment cost charge (500,000) -
------------ -----------
Net (loss)/income (12,241,748) 3,450,723
============ ===========
Basic (loss)/earnings per share (1.84) 0.55
Fully diluted (loss)/earnings per share (1.15) 0.48
Weighted average number of shares outstanding
Basic (loss)/earnings per share 6,659,622 6,283,410
Fully diluted (loss)/earnings per share 9,224,544 9,502,130
</TABLE>
-6-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
$ $
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (12,241,748) 3,450,723
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,192,880 2,632,627
Debenture redemption reserve created 562,500 -
Devaluation of intangibles on transfer of Leisure to Lifestyle 4,380,126 -
Deferred income taxes 250,076 (7,003)
Net loss/(gain) on sale of fixed assets 509,285 76,810
Net gain on sale of investment in First Lifestyle Holdings Limited (747,093) -
Net gain on sale of non core subsidiaries (179,349)
Effect of changes in current assets and current liabilities (6,202,985) 386,100
Minority interest in consolidated subsidiary companies 2,622,490 1,708,678
----------- ---------
Net cash provided by operating activities (7,853,818) 8,247,935
----------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (2,794,041) (3,444,009)
Proceeds on disposal of fixed assets 482,766 72,421
Proceeds on disposal of investment in First SA Lifestyle Holdings Limited - 3,507,424
Proceeds on dilution in First Lifestyle Holdings Limited 10,352,556 5,970
Additional shares in First Lifestyle Holdings Limited acquired (33,655) -
Restraint of trade payments (1,385,197) -
Additional intangibles acquired (17,896) -
Additional purchase price payments (2,484,510) (3,015,118)
Other assets acquired (175,812) (204,553)
Acquisitions of subsidiaries (net of cash of $430,556) (2,434,902) (23,489,585)
Proceeds on disposal of subsidiaries (net of cash) 14,189 -
Increase in loans to related companies - -
---------- -----------
Net cash used in investing activities 1,523,498 (26,567,450)
---------- -----------
Cash flows from financing activities:
Net borrowings in bank overdrafts 739,916 2,496,419
Borrowings of long term debt (1,775,955) 15,368,342
Reduction in deferred debt issue costs - (958,543)
Borrowings/(repayments) in short term debt (1,314,396) 219,679
Proceeds on stock issues 1,033,613 3,840,077
Proceeds on preference stock issued 9,891,197 -
Common stock repurchased (2,934,187) -
---------- ----------
Net cash provided in financing activities 5,640,188 20,965,974
---------- ----------
Effect of exchange rate changes on cash 4,058,042 (1,541,079)
---------- ----------
Cash utilized by operations 3,367,910 1,105,380
Cash on hand at beginning of period 17,948,991 19,889,111
Cash on hand at end of period 21,316,901 20,994,491
========== ==========
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
LEISUREPLANET HOLDINGS, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' INVESTMENT
FIRST FIRST FIRST
LEISURE LEISURE SOUTH SOUTH SOUTH
PLANET PLANET AFRICAN AFRICAN AFRICAN
HOLDINGS, LTD. HOLDINGS, LTD. HOLDINGS HOLDINGS HOLDINGS CAPITAL FOREIGN
A CLASS B CLASS B CLASS REDEEMABLE PREFERENCE IN CURRENCY
COMMON COMMON COMMON PREFERENCE CAPITAL IN EXCESS OF RETAINED TRANSLATION
STOCK STOCK STOCK STOCK EXCESS OF PAR PAR EARNINGS ADJUSTMENTS TOTAL
$ $ $ $ $ $ $ $ $
--- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 30 June 1998 56,492 18,223 539 - - 28,288,404 7,209,977 (17,711,462) 17,862,173
Issuance of stock to FSAC
escrow agent 2,434 - - - - (2,434) - - -
Conversion of debentures 1,272 - - 573,828 575,100
Issuance of stock on additional - - 41 - - 1,033,572 - - 1,033,613
purchase price payments
Net income - - - - - - (5,749,964) - (5,749,964)
Translation adjustment - - - - - - - 959,243 959,243
------- ------- ---- ----- ---------- ---------- ---------- ---------- ---------
Balance at 30 September 1998 60,198 18,223 580 - - 29,893,370 1,460,013 (16,752,219) 14,680,165
Redemption of stock from FSAC (17,260) - - - - (2,916,927) - - (2,934,187)
escrow agent
Net loss - - - - - - (4,025,666) - (4,025,666)
Translation adjustment - - - - - - - 182,971 182,971
------ ------- ---- ----- ---------- ----------- --------- ----------- ----------
Balance at 31 December 1998 42,938 18,223 580 - - 26,976,443 (2,565,653)(16,569,248) 7,903,283
Conversion of B Class stock
to A Class stock 8,758 (8,758) - - - - - - -
Conversion of 9% debentures to 210 - - - - 125,790 - - 126,000
common stock
FSAH Redeemable Preference - - - 9,891 9,881,306 - - - 9,891,197
stock issued
Net loss - - - - - - (2,466,120) - (2,466,120)
Translation adjustment - - - - - - - 1,031,350 1,031,350
------ ------ ---- ------ --------- ---------- --------- ----------- ----------
Balance at 31 March 1999 51,906 9,466 580 9,891 9,881,306 27,102,233 (5,031,773)(15,537,898) 16,485,711
------ ------ ---- ------ --------- ---------- --------- ----------- ----------
</TABLE>
-8-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1. ORGANIZATION AND PRINCIPAL ACTIVITIES OF THE GROUP
Leisureplanet Holdings, Ltd. (formerly known as First South Africa
Corp., Ltd.) (the "Company") was founded on September 6, 1995. The
purpose of the Company is to acquire and operate South African
companies and acquire and develop internet related companies with an
emphasis on European based e-commerce related businesses.
The principal activities of the group include the following:
LIFESTYLE INTERESTS
The manufacture, sale and distribution of value added food products,
including ready to eat and ready for bake off pastry related food
products, speciality breads and staple breads, a wide range of prepared
food products and a wide range of processed meat products, and the
manufacture, sale and distribution of injection molded plastic
products, wooden outdoor furniture and parasols, cast iron and aluminum
outdoor products and a range of outdoor barbecue products and
accessories.
INTERNET RELATED TRAVEL BUSINESS
The provision of one-stop Internet travel related services via a
dedicated database of all travel related services.
2. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
The Company acquired 81% of the issued capital of Leisure Planet
Investments Limited for a consideration of $12,756,655. The Company has
commitments to inject a further $9.9 million into this business from
the date of acquisition over the next twelve month period.
$
Acquisition costs
Cash consideration 2,865,458
==========
Summary allocation of purchase price
Current assets 10,538,611
Property, plant and equipment 307,168
Development costs 1,138,368
Goodwill 10,427,301
----------
TOTAL ASSETS ACQUIRED 22,411,498
----------
Current liabilities 868,519
Long term debt 8,786,324
----------
TOTAL LIABILITIES ASSUMED 9,654,843
----------
12,756,655
==========
The Company disposed of its 70% shareholding in Humidair (Pty) Ltd for
consideration of $58,824, realizing a loss on disposal of $15,409.
The Company disposed of its 100% interest in First Strut (Pty) Ltd in
exchange for the assumption of liabilities associated with the
business. The Company realized a profit on disposal of $371,679.
-9-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
2. ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES (CONTINUED)
The Company sold its 100% interest in Europair Africa (Pty) Ltd in
exchange for the agreement to repay $1.6 million of loans associated
with the business. The Company realized a loss on disposal of $303,466
The Company sold its 84.3% interest in First SA Lifestyle Holdings
Limited to First SA Food Holdings Limited in which an effective 57.5%
interest has been retained, this has resulted in a restructuring charge
of $4,380,126 being charged to the income statement.
The Company is required to make additional payments to the former
owners of its subsidiaries based on a multiple of pre tax earnings.
These payments are to be made by the issuance of stock and payment of
cash over the next year.
Additional purchase price payments made during the current year total
$2,484,510. This amount was allocated as follows:
Goodwill 712,225
Recipes 1,150,195
Trademarks 622,090
---------
2,484,510
=========
These additional purchase price payments were made as follows:
Cash 1,450,897
Shares issued in lieu of cash 1,033,613
---------
2,484,510
=========
3. SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles and
incorporate the following significant accounting policies:
CONSOLIDATION
Leisureplanet Holdings, Ltd. consolidates its majority owned
subsidiaries. The consolidated financial statements include the
accounts of the Company and its subsidiaries. Minority interests have
been taken into account when determining the net income due to the
Company. Material intercompany transactions have been eliminated on
consolidation.
ACCOUNTING ESTIMATES
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, disclosure of
contingent liabilities at the financial statement date and reported
amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
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<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Earnings per share on common shares is based on net income and reflects
dilutive effects of any stock options and warrants which exist at year
end.
INTANGIBLE ASSETS
Goodwill, recipes and other intellectual property, and trademarks are
being amortized on a straight line basis over a period of twenty to
twenty five years. If facts and circumstances were to indicate that the
carrying amount of goodwill, recipes and other intellectual property is
impaired, the carrying amount would be reduced to an amount
representing the discounted future cash flows to be generated by the
operation.
Also included in intangible assets are non competition agreements
relating to the Europair acquisition which are being amortized on a
straight line basis over the six year term of the agreements.
The Company has adopted Statement of Financial Accounting Standards No.
121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." No impairments in
long-lived assets has taken place.
FOREIGN CURRENCY TRANSLATION
The functional currency of the underlying companies is that of South
African Rand. Accordingly, the following rates of exchange have been
used for translation purposes:
o Assets and liabilities are translated into United States
Dollars using the exchange rates at the balance sheet date.
o Common stock and capital in excess of par are translated into
United States Dollars using historical rates at date of
issuance.
o Revenue, expenses, gains and losses are translated into United
States Dollars using the weighted average exchange rates for
each year.
The resultant translation adjustments are reported in the component of
stockholders' investment designated as "Foreign currency translation
adjustment".
FOREIGN ASSETS AND LIABILITIES
Transactions in foreign currencies arise as a result of inventory
purchases from foreign countries and intercompany funding transactions
between the Company and its subsidiaries. Transactions in foreign
currencies are accounted for at the rates ruling on transaction dates.
Exchange gains and losses are charged to the income statement during
the period in which they are incurred. Foreign assets and liabilities
of the group which are not denominated in United States Dollars are
converted into United States Dollars at the exchange rates prevailing
at the financial year end or at the
-11-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
rates of forward cover purchased. Forward cover is purchased to hedge
the currency exposure on foreign liabilities.
INVENTORIES
Inventories are valued at the lower of cost or net realizable value,
using both the first-in, first-out and the weighted average methods.
The value of work-in-progress and finished goods includes an
appropriate portion of manufacturing overheads. A valuation reserve has
been established to reduce the values of certain identified inventories
(determined to be obsolete or otherwise impaired) to their estimated
net realizable values (market or selling price less costs to dispose).
PROPERTY, PLANT AND EQUIPMENT
Land is stated at cost and is not depreciated. Buildings are
depreciated on the straight line basis over estimated useful lives of
20 years.
Plant and equipment, and motor vehicles are written off over their
estimated useful lives of 5 to 10 years.
INCOME TAXES
Income tax expense is based on reported earnings before income taxes.
Deferred income taxes represent the impact of temporary differences
between the amounts of assets and liabilities recognized for financial
reporting purposes and such amounts recognized for tax purposes.
Deferred taxes are measured by applying currently enacted tax laws.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As at June 30 1998, the carrying value of accounts receivable, accounts
payable and investments approximate their fair value. The carrying
value of long term debt approximates fair value, as the debt, other
than convertible debentures, interest rates are keyed to the prime
lending rate. The convertible debentures are believed to approximate
fair market.
REVENUES
Revenues comprise net invoiced sales of washers, manufactured packaging
machines, spares and service charges, food products, lifestyle
products, air conditioning systems, fans and related accessories, and
rental income. Combined revenues exclude sales to group companies.
Revenues are stated net of allowances granted to customers and trade
discounts. Returns of defective products are offset against revenues.
Due to the low incidence of warranty returns, where warranties are
provided to customers, the warranty costs are charged to cost of sales
as and when incurred.
-12-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
3. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
GAIN ON DISPOSAL OF SUBSIDIARY STOCK
Subsidiary stock disposed of during the period is recognized as a gain
in the statement of income and is separately disclosed as a non
operating gain.
4. INVENTORIES
Inventories consist of the following:
MARCH 31, JUNE 30,
1999 1998
$ $
-------- --------
Finished goods 3,784,109 7,156,784
Work in progress 2,377,038 649,465
Raw materials and ingredients 3,051,060 3,220,748
Supplies 999,207 959,396
----------- ----------
Inventories (Gross) 10,211,414 11,986,393
Less: Valuation allowances (165,876) (243,780)
------------ ------------
Inventories (Net) 10,045,538 11,742,613
========== ==========
5. COMMITMENTS
The Company is required to make additional payments to the former
owners of its subsidiaries based on a multiple of pre tax earnings.
These payments are to be made by the issuance of stock and payment of
cash over the next year.
6. EARNINGS PER SHARE
Earnings per share data is calculated as follows:
BASIC EARNINGS PER SHARE FOR THE QUARTER (1999)
Net income available to common stockholders (2,466,120)
-----------
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
Balance at January 1, 1999 6,254,649 1.00 6,254,649
Redemption of shares during the quarter (142,918) 1.00 142,918
Options converted to shares during the quarter 25,500 1.00 25,500
--------- ---------
WEIGHTED AVERAGE SHARES 6,137,231 6,137,231
--------- ---------
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<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
6. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE FOR THE QUARTER (1998)
Net income available to common stockholders 917,715
=========
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
<S> <C> <C> <C>
Balance at January 1, 1998 7,072,892 1.00 7,072,892
Options converted to shares during the quarter 25,000 0.01 278
-----------
WEIGHTED AVERAGE SHARES 7,097,892 7,073,170
=========== =========
DILUTED EARNINGS PER SHARE FOR THE QUARTER (1999)
Net income available to common stockholders (2,466,120)
Add impact of assumed conversions 653,794
-----------
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS (1,812,326)
===========
Weighted average shares 6,137,231
Warrants and options not yet exercised 19,852
9% convertible debentures 921,666
Increasing rate debentures 1,578,947
----------
ADJUSTED WEIGHTED AVERAGE SHARES 8,657,696
----------
DILUTED EARNINGS PER SHARE FOR THE QUARTER (1998)
Net income available to common stockholders 917,715
Add impact of assumed conversions 459,019
----------
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 1,376,734
==========
Weighted average shares 7,073,170
Warrants and options not yet exercised 280,216
9% convertible debentures 1,666,667
Increasing rate debentures 1,578,947
----------
ADJUSTED WEIGHTED AVERAGE SHARES 10,599,000
==========
</TABLE>
-12-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
6. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
BASIC EARNINGS PER SHARE FOR THE YEAR TO DATE (1999)
Net income available to common stockholders (12,241,748)
============
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
<S> <C> <C> <C>
July 1, 1998 7,472,324 1.00 7,472,324
JULY 1 - SEPTEMBER 30, 1998
Additional purchase price payments 242,684 0.67 162,085
Warrants converted to shares during the quarter 127,200 0.96 122,558
OCTOBER 1 - DECEMBER 31, 1998
Redemption of escrow shares during the quarter (1,583,059) 0.51 (1,057,299)
JANUARY 1 - MARCH 31, 1999
Redemption of shares during the quarter (142,918) 0.33 (46,944)
Options converted to shares during the quarter 21,000 0.33 6,898
------------ ------------
WEIGHTED AVERAGE SHARES 6,137,231 6,659,622
------------ ------------
BASIC EARNINGS PER SHARE FOR THE YEAR TO DATE (1998)
Net income available to common stockholders 3,450,723
============
SHARES FRACTION OF WEIGHTED
DATES OUTSTANDING OUTSTANDING PERIOD AVERAGE SHARES
July 1, 1997 5,359,615 1.00 5,359,615
JULY 1 - SEPTEMBER 30, 1997
Additional purchase price payments 57,127 66.70 38,154
Acquisition of subsidiaries 27,624 66.70 18,450
Warrants converted to shares during the quarter 159,425 86.20 137,394
OCTOBER 1 - DECEMBER 31, 1997
Acquisition of subsidiaries on October 1, 1997 211,224 66.70 140,302
Options converted to shares during the quarter 10,000 0.30 5,292
Warrants converted to shares during the quarter 74,401 40.20 44,548
Warrants swapped into shares during the quarter 1,173,476 45.98 539,564
JANUARY 1 - MARCH 31, 1998
Options converted to shares during the quarter 25,000 0.00 91
----------- ----------
WEIGHTED AVERAGE SHARES 7,097,892 6,283,410
=========== ==========
</TABLE>
-13-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
6. EARNINGS PER SHARE (continued)
DILUTED EARNINGS PER SHARE FOR THE YEAR TO DATE (1999)
Net income available to common stockholders (12,241,748)
Add impact of assumed conversions 1,633,758
-----------
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS (10,607,990)
===========
Weighted average shares 6,659,622
Warrants and options not yet exercised 6,617
9% convertible debentures 979,358
Increasing rate debentures 1,578,947
-----------
ADJUSTED WEIGHTED AVERAGE SHARES 9,224,544
-----------
DILUTED EARNINGS PER SHARE FOR THE YEAR TO DATE (1998)
Net income available to common stockholders 3,450,723
Add impact of assumed conversions 1,120,246
-----------
ADJUSTED NET INCOME AVAILABLE TO COMMON STOCKHOLDERS 4,570,969
===========
Weighted average shares 6,283,410
Warrants and options not yet exercised 674,860
9% convertible debentures 1,666,667
Increasing rate debentures 877,193
-----------
ADJUSTED WEIGHTED AVERAGE SHARES 9,502,130
===========
-16-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
BACKGROUND AND HISTORY
The Company was incorporated in September 1995 with the intention to actively
pursue acquisitions fitting a pre- defined investment strategy. The initial
broad strategy followed in all investment decisions was as follows:
o The investment must show potential for future earnings growth and
improve on the perceived shareholder value of the company, or
o Turnover is to be within the range of $5 - $50 million
o Net income must yield a sustainable above average return on investment.
o Growth in turnover must be above average growth rates and must be
sustainable over the medium term.
o The industry in which the target operates must meet the pre defined
industry sectors identified by management as sectors meeting our broad
investment strategy.
The Company has acquired one United Kingdom subsidiary, Leisure Planet
Investments Limited, and through its South African subsidiary, First South
African Holdings (Pty) Ltd., has acquired twelve South African subsidiaries
which have met the acquisition criteria identified above.
The Leisure Planet acquisition marks a change in the Company's acquisition
strategy. The strategy has been broadened to include Internet related companies
with a particular emphasis on European based e-commerce related businesses.
The Company's acquisitions are listed below and are engaged in the following
industry segments:
LIFESTYLE INTERESTS
o Piemans Pantry
o Astoria Bakery
o Seemann's Quality Meat Products
o Gull Foods
o Fifers Bakery
o SA Leisure
o Galactex
o Republic Umbrella
o Tradewinds
INTERNET AND E-COMMERCE
o LPI Ltd
-17-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
Internet based international travel services provider.
FINANCING
o STOCKHOLDERS' FUNDING
The Company has funded itself primarily through stockholders' loans and
capital contributions.
Additional funds were raised from the proceeds of the Company's Initial
Public Offering (IPO) completed in January 1996.
o BRIDGE FINANCING
Bridge financing was raised to finance acquisitions made prior to the
IPO.
o DEBENTURES
The Company has issued two tranches of subordinated convertible
debentures to raise funds for further acquisitions.
The Company anticipates that it will derive dividend income primarily through
income generated from the operations of acquired companies in South Africa.
SOUTH AFRICAN OPERATIONS
As the Company's results are reported in U.S. Dollars, but revenues are
primarily generated in South African Rand, the South African inflation rate and
the depreciation of the South African Rand against the U.S. Dollar are important
to the understanding of the Company's results.
In broad terms, if the deterioration of the Rand is in excess of the South
African inflation rate, then the Company would need to generate South African
revenue in excess of the South African inflation rate to maintain Dollar parity.
The average rate for the South African Rand against the U.S. Dollar for the
periods presented in this report are as follows:
-18-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998
Rate of exchange vs $1 6.15 4.97
Depreciation 23.7%
NINE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 1998
Rate of exchange vs $1 6.03 4.83
Depreciation 24.8%
The annual rate of inflation for South Africa was approximately 7% as reported
by the South African Central Statistical services.
The results discussed below for both revenue and earnings growth are therefore
greater than inflation adjusted South African Rand.
COMPARISON TO PRIOR PERIODS
o THREE MONTHS ENDED MARCH 31, 1999 VERSUS MARCH 31, 1998
SALES
Sales have decreased to $24,591,506 from $28,218,692
This is better interpreted as a net, after inflation increase in
South African Rand of 7.84%. Due to the rapid deterioration in the
South African Rand over the past year this has resulted in a
decrease in Dollar terms. In addition the disposition of the
Europair Group has resulted in a loss of revenue which amounted to
$1,395,000 in the prior year.
The results for the three months ended March 31, 1999 also include
the following operations:
o Leisure Planet Investments Limited
The sales from this company for the three months ended March 31,
1999 is negligible due to the fact that the company has only
recently begun marketing its e-commerce transaction related
services, having served as a content developer for most of its
existence.
-19-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
The contribution by the individual business segments towards total
sales for the three months ended March 31, is as follows:
1999 1998
% %
Internet related businesses 0.1 -
Lifestyle interests 82.1 72.7
Packaging equipment and materials 8.9 11.8
Industrial Manufacturing 8.9 15.5
------ -----
100.0 100.0
====== =====
The Rand value of sales in the Lifestyle interests business segment has
increased over the prior period. The packaging and industrial segments
have experienced decreased revenues. The decreases can be explained by
the following:
o The disposal of Europair Africa, First Strut and Humidair
during the current financial year. These subsidiaries
contributed approximately $1,395,000 of revenue for the
comparative period in the prior year.
o The difficult trading conditions generally and the trading
conditions facing the packaging industry in South Africa has
resulted in a reduction of capital expenditure by
significant customers depressing sales of packaging
machines.
The overall increase experienced by the Lifestyle Interests
business segment can be explained by:
o Increase in demand for the Company's products as the middle
class base of consumers continues to grow as South Africa's
transition to more broad based economic participation moves
forward.
o The Company has made additional capital expenditures in
order to increase manufacturing capacity and to exploit the
additional demand being experienced.
o Significant growth in export turnover due to the recent
weakness of the South African Rand against all major
currencies, resulting in more favorable pricing and
competitive ability of South African products.
COST OF SALES
Cost of goods sold of $15,391,506, (representing 62.6% of sales) has
decreased from $16,536,884 (representing 58.6% of sales) for the
comparative period in the prior year.
The cost of goods sold by the individual business segments
as a percentage of sales for the three months ended March
31, is as follows:
-20-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
% %
Internet related businesses - -
Lifestyle interests 60.4 56.5
Packaging equipment and materials 80.2 64.5
Industrial Manufacturing 66.2 63.8
The overall increase in the percentage of cost of goods sold can be
explained by the following:
o LIFESTYLE INTERESTS
The increase in the Lifestyle cost of sales percentage can be
attributed to the difficult economic conditions facing the
emerging market economies as a whole exerting downward pressure on
margins.
o PACKAGING EQUIPMENT AND MATERIALS
The depressed state of packaging materials prices and the
competitive pressure in this segment has eroded margins
considerably. In addition, there are significant operating
inefficiencies being experienced in one of the Company's
subsidiaries. Management is deciding on a course of action to
follow. Management is in the process of attempting to dispose of
these businesses.
o INDUSTRIAL MANUFACTURING
The remaining subsidiary in this segment has achieved lower
margins than those previously reported for the segment as a whole
before the disposals due to the difficult trading environment
experienced in the emerging market countries during the current
year, having a negative impact on margins.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, General and Administrative costs of $10,628,392, (representing
43.2% of sales) has increased from $9,732,843 (representing 34.5% of
sales) for the comparative period in the prior year.
The increase is primarily due to the inclusion of Leisure Planet in the
results for the quarter. Leisure Plant at present has minimal revenue
generation. However, there are significant operating and marketing
costs being incurred in the development of the business. The SG&A costs
of Leisure Planet for the quarter amounted to $2,569,890.
Included in Selling, General and Administrative costs are the following
non cash charges:
1999 1998
Depreciation 569,102 618,647
Amortization of intangibles and other assets 722,204 357,010
--------- -------
1,291,306 975,657
========= =======
Percentage of total sales 5.25% 3.46%
-21-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
Intangibles are principally goodwill, trademarks, intellectual property
and restraint of trade agreements.
The Selling, General and Administrative costs of the individual
business segments as a percentage of sales for the three months ended
March 31, is as follows:
1999 1998
% %
Internet related businesses - -
Lifestyle interests 31.3 33.3
Packaging equipment and materials 29.3 36.7
Industrial Manufacturing 24.5 33.1
Corporate (Percentage of total sales) 3.2 0.9
The overall decrease in the percentage of Selling, General and
Administrative costs can be explained by the following:
o PACKAGING EQUIPMENT AND MATERIALS
The decrease in the percentage is due to tighter controls being
exercised over expenditure due to the poor turnover performance
being experienced in this sector.
o LIFESTYLE INTERESTS
Expenditures have been kept under control by improving the
administrative processes.
o INDUSTRIAL MANUFACTURING
The disposal of Europair group has resulted in a lower percentage
of SG&A to sales. The remaining subsidiary achieves a lower
percentage than the segment achieved as a whole in the past.
INTEREST EXPENSE
Interest expense of $610,491 has increased from $163,901 for the
comparative period in the prior year.
-22-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
Interest for the quarter ended March 31, 1999 consists of:
o Interest on debentures including amortization of debenture issue
costs and the creation of a capital redemption reserve fund for
the redemption of the increasing rate debentures.
o Interest income earned on cash resources and interest expense on
long term borrowings and short term funding.
OTHER INCOME
Other income of $746,540 has increased from $370,949 for the
comparative period in the prior year.
Other income consists primarily of rebates, discounts received,
commissions and government incentives earned by the operating
subsidiaries.
The significant increase is due to profit realized on the sale of
subsidiaries and government incentives earned by the Lifestyle products
segment.
NET INCOME
Net (loss)/income from consolidated subsidiaries of ($1,610,424) has
decreased from $1,467,158. This is primarily due to the losses
experienced by the Internet travel services company Leisure Planet.
Included in the loss for the current year is a loss on the restructure
of the group of $4,585,659 arising on the disposal of the Lifestyle
interests to First SA Food Holdings Limited and the subsequent change
of name of that company to First Lifestyle Holdings Limited. The loss
represents the revalue of goodwill and trademarks in the Lifestyle
segment to represent fair value at the time of the transaction. A
provision of $5,007,596 for share repurchase charges in terms of
agreements reached with the previous vendors of several of the food
segment businesses in terms of which the price at which the Company's
shares were held in escrow on their behalf was warranted at a certain
level. These vendors have exercised a put option on the Company,
requiring the repurchase of the escrow shares resulting in the
extraordinary charge. A retrenchment provision of $500,000 was also
raised to restructure the non performing companies within the packaging
and industrial sectors.
Net (loss)/income of $2,466,120 represents $0.40 a share as compared to
$917,715 representing $0.13 per share in the comparative period in the
prior year. Net income for the quarter ended March 31, 1999 included a
provision of $855,696 for:
o A 49% minority interest in the Company's publicly traded
subsidiary, First Lifestyle Holdings Limited.
The current market value of the Company's 51% stake in First Lifestyle
Holdings Limited is approximately $37.7 million.
-23-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
For purposes of the Company's earnings per share calculation, the
Company had weighted average shares outstanding of 6,137,231 as opposed
to 7,073,170 for the comparative period in the prior year.
NINE MONTHS ENDED MARCH 31, 1999 VERSUS MARCH 31, 1998
SALES
Sales have decreased to $82,807,084 from $85,770,957.
This is better interpreted as a net, after inflation increase in
South African Rand, of 20.5%.
The nine month results reflect revenue for the Europair group for
a significant portion of the year. Therefore, there is a disparity
between the three months and the nine month results.
The results for the nine months ended March 31, 1998 do not
include the following operations:
o Leisure Planet Investments Limited
The contribution by the individual business segments towards total
sales for the nine months ended March 31, is as follows:
1999 1998
% %
Internet related businesses 0.3 -
Lifestyle interests 78.6 72.8
Packaging equipment and materials 9.4 11.1
Industrial Manufacturing 11.7 16.1
---- -----
100.0 100.0
===== =====
The packaging and industrial sectors have experienced decreased
revenues due to the disposal of the Europair Group during the past
quarter and the poor trading conditions facing the packaging
sector.
The increase in the Lifestyle sector can be explained by:
o Increase in demand for the Company's products as the middle
class base of consumers continues to grow as South Africa's
transition to more broad based economic participation moves
forward.
o The Company has made additional capital expenditures in
order to increase manufacturing capacity and to exploit the
additional demand being experienced.
-24-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
o Significant growth in export turnover due to the recent
weakness of the South African Rand against all major
currencies, resulting in more favorable pricing and
competitive ability of South African products.
The increases in the Lifestyle and Processed foods sectors can be
explained by:
o Increase in demand for the Company's products as the
middle class base of consumers continues to grow as
South Africa's transition to more broad based
economic participation moves forward.
o Additional capital expenditure on increasing
manufacturing capacity has been made to exploit the
additional demand being experienced.
o Significant growth in export turnover due to the
recent weakness of the South African Rand against
all major currencies, resulting in more favorable
pricing and competitive ability of South African
products.
COST OF SALES
Cost of goods sold of $52,520,280, (representing 63.4% of sales) has
increased from $52,308,927 (representing 61.0% of sales) for the
comparative period in the prior year.
The cost of goods sold by the individual business segments as a
percentage of sales for the nine months ended March 31, is as follows:
1999 1998
% %
Internet related businesses - -
Lifestyle interests 59.3 57.7
Packaging equipment and materials 79.5 71.3
Industrial Manufacturing 69.6 68.8
The overall increase in the percentage of cost of goods sold can be
explained by the following:
o LIFESTYLE PRODUCTS
The increase in the Lifestyle cost of sales percentage can be
attributed to the difficult economic conditions facing the
emerging market economies as a whole exerting downward pressure on
margins.
o PACKAGING EQUIPMENT AND MATERIALS
The depressed state of packaging materials prices and the
competitive pressure in this segment has eroded margins
considerably. In addition, there are significant operating
inefficiencies being
-25-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
experienced in one of the Company's subsidiaries. Management is
deciding on a course of action to follow.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, General and Administrative costs of $28,179,333, (representing
34.0% of sales) has increased from $27,475,571 (representing 32.0% of
sales) for the comparative period in the prior year.
Included in Selling, General and Administrative costs are the following
non cash charges:
1999 1998
Depreciation 1,874,843 1,698,884
Amortization of intangibles and other assets 1,318,037 933,743
--------- ---------
3,192,880 2,632,627
========= =========
Percentage of total sales 3.86% 3.07%
Intangibles are principally goodwill, trademarks, intellectual property
and restraint of trade agreements.
The Selling, General and Administrative costs of the individual
business segments as a percentage of sales for the nine months ended
March 31, is as follows:
1999 1998
% %
Internet related businesses - -
Lifestyle interests 31.1 31.9
Packaging equipment and materials 30.7 36.7
Industrial Manufacturing 25.0 29.9
Corporate (Percentage of total sales) - 1.1
The overall decrease in the percentage of Selling, General and
Administrative costs can be explained by the following:
o LIFESTYLE INTERESTS
Expenditure has been kept under control by improving the
administrative processes. In addition, items that were previously
reported as SG&A expenses are now reported as cost of sales in
accordance with Company policy.
o PACKAGING EQUIPMENT AND MATERIALS
-26-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
The decrease in the percentage is due to tighter controls being
exercised over expenditures due to the poor turnover performance
being experienced in this sector.
o INDUSTRIAL MANUFACTURING
The disposal of Europair group has resulted in a lower percentage
of SG&A to sales. The remaining subsidiary achieves a lower
percentage than the segment achieved as a whole in the past.
INTEREST RECEIVED/EXPENSE
Interest expense of $1,175,922 has increased from an interest received
of $93,680 for the comparative period in the prior year.
Interest for the nine months ended March 31, 1999 consists of:
o Interest on debentures including amortization of debenture issue
costs and the creation of a capital redemption reserve fund for
the redemption of the increasing rate debentures.
o Interest income earned on cash resources and interest expense on
long term borrowings and short term funding.
OTHER INCOME
Other income of $1,041,806 has increased from $1,050,860 for the
comparative period in the prior year.
Other income consists primarily of rebates, discounts received,
commissions and government incentives earned by the operating
subsidiaries.
NET INCOME
Net (loss)/income from consolidated subsidiaries of ($2,148,493) has
decreased from $3,450,723.
Included in the loss for the current year is a loss on the restructure
of the group of $4,585,659 arising on the disposal of the Lifestyle
interests to First SA Food Holdings Limited and the subsequent change
of name of that company to First Lifestyle Holdings Limited. The loss
represents the revalue of goodwill and trademarks in the Lifestyle
segment to represent fair value at the time of the transaction. A
provision of $5,007,596 for share repurchase charges in terms of
agreements reached with the previous vendors of several of the food
segment businesses in terms of which the price at which the Company's
shares were held in escrow on their behalf was warranted at a certain
level. These vendors have exercised a put option on the Company,
requiring the repurchase of the escrow shares resulting in the
extraordinary charge. A retrenchment provision of $500,000 was also
raised to restructure the non performing companies within the packaging
and industrial sectors.
Net (loss)/income of ($12,241,748) represents a loss of ($1.84) per
share as compared to $3,450,723 representing $0.55 per share in the
comparative period in the prior year. Net income for the nine months
ended March 31, 1999 included a provision of $2,369,370 for:
o A 49% minority interest in the Company's publicly traded
subsidiary, First Lifestyle Holdings Limited.
For purposes of the Company's earnings per share calculation, the
Company had a weighted average number of shares outstanding of
6,659,622 shares outstanding as opposed to 6,283,410 for the
comparative period in the prior year.
FINANCING
o INTERNALLY GENERATED FUNDING
-27-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
As of March 31, 1999, the Company had net cash of $18,955,982 with
working capital of $34,715,857. As of March 31, 1999, the Company had a
total of $35,769,793 in debt, of which amount $20,530,000 related to
the Company's 9% and increasing rate subordinated convertible
debentures with the remainder being bank debt. Of the bank debt,
$901,999 was classified as current.
Cash flows utilized by operating activities for the period ended March
31, 1999 totalled $7,853,818. Cash flows generated in investing
activities totalled $1,523,498 of which the Company realized $14,189 on
the disposal of some of its non core operating subsidiaries. The
Company expended $2,484,510 on additional purchase price payments and
purchased $2,794,041 in net additions to property, plant and equipment
of its subsidiaries. Net cash utilized in financing activities amounted
to $5,640,188. This included the redemption of debentures amounting to
$2,733,810. An additional $10,352,556 was generated by the disposal of
a part interest in First Lifestyle Holdings Limited.
o FUTURE COMMITMENTs
The Company has contingent payments over the next 16 months amounting
to approximately $3,074,044. The Company anticipates that its cash on
hand and operating cash flows will be sufficient to fully fund these
payments as well as fund the capital expenditures for its various
operations. Excess cash will also be utilized to fund additional
acquisitions. The Company anticipates that any longer term contingent
acquisition payments will be funded out of operating cash flows of the
acquired entities.
In regard to the operations of its newly acquired subsidiary Leisure
Planet Investments Limited, the Company has allocated approximately
$9.9 million to fund the future losses of this operation. However, the
Company anticipates that the projected losses for this subsidiary will
exceed this allocation. As a result the Company will seek additional
outside financing to provide capital to this subsidiary.
The Company's operating subsidiaries generally collect their
receivables within 65 - 90 days and reserve approximately 3% for
doubtful accounts. Historically, the Company's operating and capital
needs have been met by internal cash flow and outside bank borrowing.
It is management's belief that capital expenditures for the foreseeable
future can continue to be met by internal cash flow and bank borrowing.
The Company's operating subsidiaries engage in certain hedging
transactions with respect to certain overseas purchases in order to
lock in a specified exchange rate.
The Company intends to continue to pursue an aggressive acquisition
strategy in South Africa and anticipates utilizing a substantial
portion of its cash balances and operating earnings of its subsidiary
First Lifestyle Holdings Limited to fund this strategy to the extent
that suitable acquisition candidates can be identified.
The Company may be required to incur additional indebtedness or equity
financing in connection with future acquisitions. There is no assurance
that the Company will be able to incur additional indebtedness or raise
additional equity to finance future acquisitions on terms acceptable to
management, if at all.
YEAR 2000 COMPLIANCE
-28-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
o STATE OF READINESS
Due to the nature and type of operations falling under the Company,
none of the operating entities have very sophisticated Information
Technology ("IT") and non IT systems. The majority of the management
information systems within the group are purchased software packages.
Management in each operating entity has evaluated or is currently
evaluating the Year 2000 readiness of the management information
systems and software upgrades have been purchased or are on order to
ensure that the Company will be Year 2000 compliant from a management
information perspective.
The extent of usage of non IT systems within the group is limited to
one or two cases. These systems are in the process of being tested to
ensure Year 2000 compliance, however these processes are not of the
nature that would seriously disrupt the functioning of the Company
should any particular process fail.
While evaluating the management information systems, a thorough check
of all hardware within the Company is being carried out. Where
necessary, changes and upgrades are being made to ensure that the
Company is Year 2000 compliant. These changes are not expected to be
material and the costs have already being incurred and paid where the
amounts are considered to be significant.
o COSTS TO ADDRESS YEAR 2000 ISSUES
Based on the assessments already carried out by the Company and the
ongoing assessments being performed, the costs that have materialized
to date and the costs that are expected to materialize are not
significant to the Company or any individual entity as a whole.
However, there can be no guarantee that the costs involved will not be
material should a significant problem be subsequently discovered.
The costs incurred to date have typically been to replace aging
hardware, which have not amounted to material amounts and were already
provided for in general capital expenditure budgets. Costs also have
been incurred to upgrade the existing purchased software. In each case,
upgrades are available from the software suppliers who certify Year
2000 compliance. The costs incurred on the software upgrades have not
been material to date.
o RISK ASSOCIATED WITH YEAR 2000 ISSUES
Based on risk assessments already carried out and assessments which are
due to take place, the Company feels that due to the level of IT
sophistication within the Company, the risk of ceasing production and
distribution completely is minimal.
The Company is able to support a manual record keeping system
temporarily should there be a total IT system failure.
In management's opinion, the significant risks that face the Company
are the states of readiness of the utility suppliers, the Company's
major suppliers, customers and bankers.
The Company has taken steps to confirm that its suppliers, customers
and bankers are fully Year 2000 compliant.
-29-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
The likely impact on the Company from this risk is significant and all
steps are being taken to ensure that this risk is adequately addressed.
o CONTINGENCY PLANS
The Company is developing a contingency plan which will ensure that the
production and distribution and the recording of all transactions will
be adequately covered should there be a significant problem. However,
the Company cannot guarantee that these plans will be sufficient to
prevent disruption and the likely impact that this may have on the
group as a whole.
Where possible, alternative sources of supply have been identified,
should there be a significant disruption from one of our suppliers.
However, there are significant suppliers within the group which are
sole suppliers and therefore, the Company is not able to cover this
risk sufficiently. Therefore, the Company is attempting to the best of
its ability to assess the state of readiness of these suppliers.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has used derivative financial instruments primarily to reduce
exposure to adverse fluctuations in foreign exchange rates with respect to
certain overseas purchases in order to lock in a specified exchange rate. The
Company does not enter into derivative financial instruments for trading
purposes. As a matter of policy all derivative positions are used to reduce risk
by hedging underlying economic exposure. The derivatives the Company has used in
the past were straightforward instruments with liquid markets.
-30-
<PAGE>
LEISUREPLANET HOLDINGS, LTD.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K filed during quarter ended March 31, 1999:
Report on Form 8-K, dated February 16, 1999 regarding changes
in the issued and outstanding shares of Class A and Class B
Common Stock of the Company (Item 5).
-31-
<PAGE>
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.
Date: May 16, 1999
LEISUREPLANET HOLDINGS, LTD.
/s/ Clive Kabatznik
----------------------------------------
Clive Kabatznik
Chief Executive Officer, President and
Chief Financial Officer
-32-
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