<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
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 000-22843
BRIDGESTREET ACCOMMODATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3327773
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30670 Bainbridge Road, Solon, OH 44139
(Address of principal executive offices) (Zip code)
(440)248-3005
(Registrant's telephone number, including area code)
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
--- ---
As of August 7, 1998, there were 7,975,765 Common Shares, without par value, of
the registrant outstanding.
<PAGE> 2
BRIDGESTREET ACCOMMODATIONS, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets:
June 30, 1998 (unaudited) and December 31, 1997............................. 3
Consolidated Statements of Operations:
Three and Six Months Ended June 30, 1998 (unaudited) and 1997 (unaudited)... 4
Consolidated Statements of Cash Flows:
Three and Six Months Ended June 30, 1998 (unaudited) and 1997 (unaudited)... 5-6
Notes to the Consolidated Financial Statements (unaudited) ...................... 7-10
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................................... 11-16
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS................................................................ 17
ITEM 2 CHANGES IN SECURITIES............................................................ 17
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.................................................. 17
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................. 17
ITEM 5 OTHER INFORMATION................................................................ 17
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K................................................ 18
SIGNATURES....................................................................... 19
</TABLE>
<PAGE> 3
BRIDGESTREET ACCOMMODATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ --------
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,922,215 $ 1,489,466
Trade accounts receivable, less allowance for doubtful
accounts of $167,000 and $200,000 in 1997 and 1998, respectively 2,217,930 7,032,343
Security deposits held by landlords 264,541 421,341
Deferred income taxes 524,156 524,156
Prepaid rent 817,769 2,250,312
Other current assets 709,254 3,814,013
------------ ------------
Total current assets 13,455,865 15,531,631
Operating stock, net of accumulated amortization 1,682,579 2,241,354
Property and equipment, net of accumulated depreciation 2,535,094 3,656,403
Other assets 208,930 88,699
Due from stockholders/affiliates 348,000 --
Goodwill, net of amortization 24,332,484 40,973,060
------------ ------------
Total assets $ 42,562,952 $ 62,491,147
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 20,121 $ 794,236
Due to stockholders and affiliates 100,835 621,034
Accounts payable 1,027,307 1,586,026
Accrued payroll and employee benefits 511,963 1,087,899
Accrued expenses, other 1,473,486 5,350,731
Deferred revenue 690,509 1,346,374
Security deposits due to customers 459,251 724,720
------------ ------------
Total current liabilities 4,283,472 11,511,020
Long-term debt, net of current maturities 25,803 7,901,715
Deferred income taxes 675,480 1,462,849
Stockholders' Equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares;
no shares issued or outstanding -- --
Common stock, $0.01 par value; authorized 35,000,000 shares;
7,789,345 and 8,169,785 shares issued and
outstanding in 1997 and 1998, respectively 77,893 81,695
Additional paid in capital 35,889,414 40,134,730
Retained earnings 1,610,890 1,437,104
Translation adjustment -- (37,966)
------------ ------------
Total stockholders' equity 37,578,197 41,615,563
------------ ------------
Total liabilities and stockholders' equity $ 42,562,952 $ 62,491,147
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE> 4
BRIDGESTREET ACCOMMODATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
----------------------------- ------------------------
1997 1998 1997 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 12,479,307 $ 24,515,942 $ 21,544,209 $ 43,999,753
Operating Expenses:
Cost of services 8,814,224 17,744,478 15,815,031 32,807,612
Selling, general and administrative expense 2,447,008 5,570,128 4,397,370 9,762,501
Officers' stock compensation -- -- 1,210,261 --
Goodwill amortization 122,405 297,339 229,090 504,111
Restructuring charge -- 1,330,000 -- 1,330,000
------------ ------------ ------------ ------------
Total operating expenses 11,383,637 24,941,945 21,651,752 44,404,224
------------ ------------ ------------ ------------
Operating income (loss) 1,095,670 (426,003) (107,543) (404,471)
Other Income (Expense):
Interest income 7,932 26,984 17,288 61,235
Interest expense (63,869) (134,812) (97,473) (152,886)
Other income, net 72,773 94,941 128,684 183,783
------------ ------------ ------------ ------------
Other income (expense), net 16,836 (12,887) 48,499 92,132
------------ ------------ ------------ ------------
Income (loss) before provision (benefit)
for income taxes 1,112,506 (438,890) (59,044) (312,339)
Provision (benefit) for income taxes 500,000 (197,501) 518,020 (140,553)
------------ ------------ ------------ ------------
Net income (loss) $ 612,506 $ (241,389) $ (577,064) $ (171,786)
============ ============ ============ ============
Comprehensive income (loss) 612,506 (269,268) (577,064) (209,752)
============ ============ ============ ============
Net income (loss) per share-basic and dilutive $ 0.11 $ (0.03) $ (0.11) $ (0.02)
============ ============ ============ ============
Weighted average shares outstanding-basic 5,475,000 8,169,785 5,238,812 8,075,997
Weighted average shares outstanding-dilutive 5,475,000 8,169,785 5,238,812 8,075,997
</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE> 5
BRIDGESTREET ACCOMMODATIONS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1998
---------------- -----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) $ (577,064) $ (171,786)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities--
Officers' stock compensation 1,210,261 --
Depreciation and amortization 481,854 1,047,748
Changes in operating assets and liabilities
excluding the effect of acquisitions--
Accounts receivable (1,378,688) (4,491,628)
Security deposits held by landlords (37,237) (29,982)
Prepaid expenses and other assets (376,884) (3,306,762)
Accounts payable and accrued expenses 1,329,546 2,515,678
Accrued income taxes 95,839 --
Deferred income taxes (176,274) 787,369
Security deposits due to customers 130,749 (261,990)
Deferred revenue 387,677 655,865
------------ ------------
Net cash provided by (used) in operating activities 1,089,779 (3,255,488)
------------ ------------
Cash Flows From Investing Activities:
Purchases of investments in short-term marketable
securities (124,997) --
Acquisitions, net of cash acquired (655,581) (12,170,979)
Purchases of operating stock (448,343) (692,918)
Purchases of property and equipment (378,726) (1,108,671)
------------ ------------
Net cash used in investing activities (1,607,647) (13,972,568)
------------ ------------
Cash Flows From Financing Activities:
Capitalization of offering costs (218,248) --
Addition of long-term debt 2,134,140 8,529,571
Due to stockholders/affiliates (296,724) 520,199
Collection on notes receivable 10,462 745,537
------------ ------------
Net cash provided by financing activities 1,629,630 9,795,307
------------ ------------
Net increase(decrease) in cash
and cash equivalents 1,111,762 (7,432,749)
Cash and cash equivalents, beginning of period 597,939 8,922,215
------------ ------------
Cash and cash equivalents, end of period $ 1,709,701 $ 1,489,466
============ ============
</TABLE>
5.
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
Supplemental Cash Flow Information:
Cash paid for interest $ 60,805 $ 122,767
Cash paid for income taxes $ 214,054 $1,399,189
Non-Cash Transaction:
During the first quarter of 1997, the Company exchanged 4,301,000 shares of
Common Stock of the Company for all of the outstanding stock of the five
Founding Companies
</TABLE>
In the first quarter of 1998, the Company issued approximately 379,000
shares of Common Stock of the Company or securities convertible into
Common Stock of the Company as consideration in three acquisitions.
See accompanying notes to consolidated financial statements.
6.
<PAGE> 7
BRIDGESTREET ACCOMMODATIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") was
incorporated on August 19, 1996, to create a leading national provider of
flexible accommodation services through the acquisition and consolidation of the
operations of flexible accommodation service companies. During the first quarter
of 1997, the Company acquired all the outstanding stock of five flexible
accommodation service providers (the "Founding Companies"), in exchange for
4,301,000 shares of Common Stock of the Company (the "Combination"). The Company
conducted no operations prior to January 2, 1997, except in connection with its
initial public offering and the Combination. For financial reporting purposes,
the largest Founding Company, Temporary Corporate Housing Columbus, Inc. ("TCH")
was designated as the accounting acquirer, and its acquisition of the remaining
four Founding Companies was accounted for using the purchase method of
accounting.
The interim consolidated financial statements presented herein have
been prepared by the Company and include the unaudited accounts of TCH,
Corporate Lodgings, Inc. and its four affiliates, Exclusive Interim Properties,
Ltd. and its affiliate, and Temporary Housing Experts, Inc. all of which were
merged with and into subsidiaries of the Company on January 2, 1997, as well as
the accounts of the following wholly-owned operating subsidiaries from the
indicated dates on which they acquired (by merger with or purchase of
substantially all of the assets of) flexible accommodation service providers:
HAI Acquisition Corp. (March 31, 1997); BridgeStreet Texas, L.P. (December 1,
1997); BridgeStreet Arizona, Inc. (December 1, 1997); BridgeStreet North
Carolina, Inc. (January 2, 1998); BridgeStreet Raleigh, Inc. (January 2, 1998);
BridgeStreet Texas, L.P. (Austin, January 2, 1998); BridgeStreet Colorado, Inc.
(January 2, 1998); BridgeStreet Accommodations Limited (February 19, 1998);
BridgeStreet Canada, Inc. (March 2, 1998); and BridgeStreet California, Inc.
(June 1, 1998). All intercompany accounts and transactions have been eliminated.
These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the financial position of the Company as of June 30, 1998 and
the results of its operations and cash flows for the three and six month periods
ended June 30, 1998 and 1997 have been included.
Operating results for the three and six month periods ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1997.
Certain items in the 1997 financial statements have been reclassified
to conform to the 1998 presentation.
2. ACQUISITIONS
As discussed in Note 1, in the first quarter of 1997, the Company
merged with the five Founding Companies in stock-for-stock tax-free mergers. The
mergers have been accounted for using the purchase method of accounting with TCH
designated as the accounting acquirer and the other operating companies
designated as "acquired companies." The results of operations of the "acquired
companies" have been included in the accompanying consolidated financial
statements from their respective dates of acquisition. The purchase price and
allocation of the purchase price of the four "acquired companies," including the
value of stock issued to the founders of BridgeStreet as a transaction fee, was
approximately $17.7 million based on an independent appraisal of the net assets
acquired. The aggregate cost of the acquisitions exceeded the estimated fair
value of assets and liabilities of the acquired companies by $17.5 million which
is being amortized as goodwill over 35 years.
7.
<PAGE> 8
Between April 1 and December 31, 1997, the Company made three
additional acquisitions. The acquisitions have been accounted for using the
purchase method of accounting. The aggregate cost of these acquisitions was
$6.75 million, consisting of $4.4 million of cash and $2.35 million of stock.
The preliminary purchase price allocation of these acquisitions resulted in
goodwill of approximately $7.25 million that is being amortized over 35 years.
The results of operations of these acquisitions have been included in the
accompanying consolidated financial statements from the date of acquisition.
Details of these acquisitions are noted below.
On June 30, 1997, the Company acquired for cash certain assets of
Corporate Housing Services, Inc., a flexible accommodation company servicing the
Memphis, Tennessee metropolitan area
On December 1, 1997, the Company acquired certain assets of
Accommodations by Apple, Inc. ("ABA of Dallas"), a Texas flexible accommodation
company servicing Dallas and surrounding cities. The purchase consideration
consisted of cash and the issuance of approximately 151,000 shares of common
stock.
On December 1, 1997, the Company acquired certain assets of
Accommodations by Apple, Inc. ("ABA of Phoenix"), an Arizona flexible
accommodation company servicing several markets including Phoenix, Tucson and
Scottsdale. The purchase consideration consisted of cash and the issuance of
approximately 71,000 shares of common stock.
In the first quarter of 1998, the Company acquired six companies. The
acquisitions have been accounted for using the purchase method of accounting.
The total cost of these acquisitions was approximately $14.6 million, consisting
of cash and notes of $10.4 million and $4.2 million in stock. The preliminary
purchase price allocation of these acquisitions resulted in goodwill of
approximately $15.0 million that will be amortized over 35 years. The results of
operations of these acquisitions have been included in the accompanying
consolidated financial statements from the date of acquisition. Details
regarding these acquisitions are noted below.
On January 2, 1998, the Company acquired certain assets of Home on the
Road, Inc. of Charlotte, a North Carolina flexible accommodation company
servicing Charlotte and surrounding cities. The purchase consideration consisted
of cash and a promissory note.
On January 2, 1998, the Company acquired all the outstanding stock of
Home on the Road-Raleigh, a North Carolina flexible accommodation company
servicing several markets including Raleigh, Durham, Research Triangle Park,
Winston-Salem and Greensboro. The purchase consideration consisted of the
issuance of approximately 75,000 shares of common stock.
On January 2, 1998, the Company acquired for cash certain assets of
Accommodations by Apple-Denver and Accommodations by Apple-Austin, flexible
accommodation companies servicing several markets in the Denver metropolitan
area including Colorado Springs, Boulder and Fort Collins, and in the Austin,
Texas, metropolitan area. The purchase consideration of the two acquisitions was
cash and notes. Pro forma data is not presented as these acquisitions were not
material to the Company's results of operations.
On February 19, 1998, the Company acquired all the issued and
outstanding stock of London Life Apartments, Limited ("London Life"), a flexible
accommodation company servicing London, U.K. The purchase consideration
consisted of cash and the issuance of approximately 165,000 shares of common
stock.
On March 2, 1998, the Company acquired all the issued and outstanding
stock of Global Travel Apartments, Inc. ("GTA"), one of Canada's largest
providers of flexible accommodations services. GTA services the Toronto,
Montreal, Ottawa, Edmonton, Regina, Vancouver and Victoria markets. The purchase
consideration consisted of cash and the issuance of approximately 139,000 shares
of the stock of a Canadian subsidiary that is exchangeable for an equal number
of shares of common stock of the Company.
8.
<PAGE> 9
In the second quarter of 1998, the Company made one acquisition. On
June 1, 1998, the Company acquired certain assets of Gracious Corporate Lodging,
a California flexible accommodation company servicing several markets including
Santa Clara, Palo Alto and San Jose, California, and Austin, Texas. The
acquisition has been accounted for using the purchase method of accounting. The
cost of the acquisition was $1.7 million consisting of cash and notes. The
preliminary purchase price allocation of the acquisition resulted in goodwill of
approximately $1.95 million that will be amortized over 35 years. The results of
operations of this acquisition have been included in the accompanying
consolidated financial statements from the date of acquisition.
The following table presents unaudited selected financial information
for the Company, the five Founding Companies, and the acquisitions of ABA of
Dallas and ABA of Phoenix, Home on the Road, Inc. of Charlotte, Home on the
Road-Raleigh, London Life, GTA and Gracious Corporate Lodging on a pro forma
basis, assuming the companies had been combined and the initial public offering
had occurred as of the beginning of 1997.
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 21,740,512 $ 26,098,725 $ 39,241,423 $ 50,232,814
Net income (loss) 825,593 (195,164) (372,506) (13,698)
Net income (loss) per share-basic and dilutive $0.10 $(0.02) $(0.05) $0.00
</TABLE>
The pro forma results for the three and six months ended June 30, 1998
include a one-time restructuring charge of $732,000, net of taxes. Excluding
this charge, pro forma net income and earnings per share would have been
$536,836, or $0.07, and $718,302, or $0.09, for the three and six month periods,
respectively. The pro forma results for the six months ended June 30, 1997
include a one-time charge of $1.2 million, net of taxes. Excluding this charge,
pro forma net income and earnings per share for the six months ended June 30,
1997 would have been $837,755, or $0.10.
The pro forma results are not necessarily indicative of future
operations or the actual results that would have occurred had the acquisitions
been made at the beginning of 1997.
3. REVOLVING CREDIT AGREEMENT
During the first quarter of 1998, the Company increased its revolving
credit agreement from $10.0 million to $25.0 million. The revolving credit
agreement, secured by the capital stock of the Company's operating subsidiaries,
extends to March 31, 2002. Interest is payable at the option of the borrower at
the prime rate, or 1.5% above the Eurodollar or LIBOR rates. A commitment fee is
payable on the average unused credit at a rate of 0.2%. The revolving credit
agreement contains certain restrictive covenants with which the Company must
comply. The credit facility (i) prohibits the payment of dividends and other
distributions by the Company, (ii) generally will not permit the Company to
incur or assume other indebtedness and (iii) requires the Company to comply with
certain financial covenants. The Company had no amounts outstanding under the
facility at December 31, 1997, and $7.7 million outstanding at June 30, 1998.
4. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, Earnings Per Share, which is effective for periods ending after
December 15, 1997. The standard requires the presentation of basic earnings per
share ("EPS") and diluted EPS. Basic EPS replaces the primary EPS calculation
required under APB Opinion No. 15. Basic EPS excludes dilution and is calculated
using the weighted average number of common shares outstanding for the period.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB Opinion
No. 15. The share amounts used to calculate earnings per share for the three and
six months ended June 30, 1997 and 1998 are as follows:
9.
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic common shares (weighted average) 5,000,000 8,169,785 5,000,000 8,169,785
Dilutive stock options -- -- -- --
--------- --------- --------- ---------
Dilutive common shares 5,000,000 8,169,785 5,000,000 8,169,785
========= ========= ========= =========
</TABLE>
There are no adjustments to the reported amounts of net income for
purposes of computing diluted EPS.
5. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which
requires disclosure of comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined as changes
in stockholders' equity from nonowner sources and, for the Company, includes net
income and changes in the foreign currency translation.
6. ACCOUNTING STANDARDS NOT YET ADOPTED
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which is effective for the Company as of January 1, 1999.
This SOP requires start-up and organization costs to be expensed as incurred and
also requires previously deferred start-up costs to be recognized as a
cumulative effect adjustment in the statement of income. The Company plans to
adopt this SOP as of January 1, 1999. The effect of adopting this SOP has not
been determined.
7. RESTRUCTURING CHARGE
During the second quarter of 1998, the Company announced a realignment
of its senior management resulting in a charge of $1.33 million on a pretax
basis ($732,000 after tax). The second quarter charge to earnings of $1.33
million represents an accrual of $800,000 for severance and other employee
benefits for five employees and an accrual of $530,000 for lease termination
costs, the write off of certain software and marketing costs and professional
fees associated with the realignment. The accounting for the restructuring
charge is in compliance with the Emerging Issues Task Force ("EITF") 94-3,
"Liability Recognition for Cost to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." During the quarter, approximately $151,000 was
charged against the various accruals. The Company expects all costs, with the
exception of severance related expenses for one employee, to be incurred by the
end of the second quarter of 1999, and no material incremental costs are
expected to be recognized in future periods.
10.
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
BridgeStreet Accommodations, Inc. ("BridgeStreet" or the "Company") was
incorporated in August 1996 with the goal of becoming a leading national
provider of flexible accommodation services. The Company plans to achieve this
goal by implementing an aggressive acquisition program and a national operating
strategy designed to increase internal revenue growth, cost efficiencies and
profitability. In the first quarter of 1997, BridgeStreet acquired, by merger,
five flexible accommodation service providers (the "Founding Companies"). During
the second quarter, the Company acquired the assets of another flexible
accommodation service company; in the fourth quarter, two additional providers
were acquired, and in the first quarter of 1998, six additional providers were
acquired, and in the second quarter of 1998, one additional provider was
acquired.
The Company's revenues are derived primarily from renting
accommodations to guests for extended periods. Revenues depend on the number of
accommodations the Company has available under lease, the occupancy rate and the
rate charged. The rate charged is a function of, among other factors, (i) the
type, size and location of the accommodation being rented, (ii) the rental
period and (iii) any additional amenities made available to the guest during his
or her stay. Cost of services consists primarily of lease payments for
accommodations and their furnishings, and expenses associated with cleaning,
maintaining and providing utilities to accommodations. Selling, general and
administrative expense consists primarily of compensation and related benefits
for management and key employees, administrative salaries and benefits, office
rents and utilities, professional fees and advertising.
As discussed in Note 1 to the financial statements, in the first
quarter of 1997, the Company merged with five Founding Companies in stock for
stock tax-free mergers. For financial reporting purposes, Temporary Corporate
Housing Columbus, Inc. (together with its three affiliates, "TCH") is presented
as the accounting acquirer of the other Founding Companies, which have been
designated "acquired companies." The mergers have been accounted for using the
purchase method of accounting. The results of operations of the "acquired
companies" have been included in the accompanying consolidated financial
statements from their respective dates of acquisition. The purchase price and
allocation of the purchase price of the four "acquired companies," including the
value of stock issued to the founders of BridgeStreet as a transaction fee, was
approximately $17.7 million based on an independent appraisal of the net assets
acquired. The aggregate cost of the acquisitions exceeded the estimated fair
value of assets and liabilities of the acquired companies by $17.5 million which
is being amortized as goodwill over 35 years.
BridgeStreet currently is in the process of integrating certain
operational, sales and administrative functions of the Founding Companies and
other companies acquired to date. This integration process presents
opportunities to (i) enhance revenues through geographic cross-sales synergies
and (ii) reduce costs through, among other things, the elimination of
duplicative functions and the economies of scales that may be generated through
volume purchasing. However, integration necessitates additional costs and
expenditures related to corporate management and administration, public company
operations, systems integration and facilities expansion. As a result of these
possible cost savings and various additional costs, historical operating results
may not be comparable to, or indicative of, future performance. There can be no
assurance that the Company's integration efforts will be successful.
11.
<PAGE> 12
RESULTS OF OPERATIONS - BRIDGESTREET INTERIM RESULTS
Three Months Ended June 30, 1998 Compared to Three Months Ended June
30,1997
BridgeStreet's Consolidated Statements of Operations for the three and
six months ended June 30, 1997 include the unaudited accounts of TCH, Corporate
Lodgings, Inc. (together with four affiliates, "CLI"), Exclusive Interim
Properties, Ltd. (together with an affiliate, "EIP") and Temporary Housing
Experts, Inc. ("THEI"), all of which were acquired on January 2, 1997, and, for
the three months ended June 30, 1997, HAI Acquisition Corp. ("HA") which was
acquired on March 31, 1997. The operating results for the three and six months
ended June 30, 1998 also include the unaudited accounts of the following
wholly-owned operating subsidiaries from the indicated dates on which they were
acquired (by merger with or purchase of substantially all of the assets of)
flexible accommodation service providers: BridgeStreet Texas L.P. (December 1,
1997); BridgeStreet Arizona, Inc. (December 1, 1997); BridgeStreet North
Carolina, Inc. (January 2, 1998); BridgeStreet-Raleigh, Inc. (January 2, 1998);
BridgeStreet Colorado, Inc. (January 2, 1998); BridgeStreet Texas L.P. (Austin,
January 2, 1998); BridgeStreet Accommodation Limited (February 19, 1998);
BridgeStreet Canada, Inc. (March 2, 1998), and BridgeStreet California, Inc.
(June 1, 1998).
The Company's Consolidated Balance Sheet as of December 31, 1997,
reflects the accounts of TCH, CLI, EIP, THEI, HA, BridgeStreet Texas L.P. and
BridgeStreet Arizona, Inc. The Company's Consolidated Balance Sheet as of June
30, 1998, also includes the accounts of BridgeStreet North Carolina, Inc.,
BridgeStreet Raleigh, Inc., BridgeStreet Colorado, Inc., BridgeStreet Texas L.P.
(Austin, Texas), BridgeStreet Accommodations Limited, BridgeStreet Canada, Inc.,
and BridgeStreet California, Inc.
Revenues. Revenues for the three months ended June 30, 1998 increased
$12.0 million, or 96%, from $12.5 million in 1997 to $24.5 million for the three
months ended June 30, 1998. The increase in revenues primarily was the result of
an increase in the number of accommodations rented during the period due to the
acquisition of the flexible accommodation service providers and growth in
existing markets.
Cost of Services. Cost of services for the three months ended June 30,
1998 increased $8.9 million, or 101%, from $8.8 million in 1997 to $17.7 million
in 1998. Cost of services as a percentage of revenues for the three months ended
June 30 increased from 70.6% in 1997 to 72.4% in 1998. The dollar increase in
cost of services was primarily related to the acquisition of the flexible
accommodation service providers. Cost of services as a percentage of revenues
increased as a result of higher leasing and maintenance costs in certain newly
acquired companies and lower occupancy rates in several markets.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the three months ended June 30, 1998 increased $3.2
million, or 128%, from $2.4 million in 1997 to $5.6 million in 1998. Selling,
general and administrative expense as a percentage of revenues for the three
months ended June 30 was 19.6% in 1997 and 22.7% in 1998. The dollar and
percentage increase in selling, general and administrative expense primarily was
a result of the acquisition of the flexible accommodation service providers,
hiring of a corporate management team, and other costs associated with creating
a public company infrastructure. The Statement of Operations for the three
months ended June 30, 1998 includes a restructuring charge of $1.33 million
related to a management realignment. See footnote 7 included in the notes to the
Consolidated Financial Statements for additional information.
Income Tax Provision. For the three months ended June 30, 1998, the
Company recorded a tax benefit of $197,501 on a pre-tax loss of $438,890,
compared to a tax provision of $500,000 on a pre-tax income of $1.1 million for
the three months ended June 30, 1997. The tax provision is based on the
Company's estimated consolidated effective tax rate for the 1998 fiscal year
after considering nondeductible goodwill expense.
12.
<PAGE> 13
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30,
1997
Revenues. Revenues for the six months ended June 30, 1998 increased
$22.5 million, or 104%, from $21.5 million in 1997 to $44.0 million in 1998. The
increase in revenues primarily was the result of an increase in the number of
accommodations rented during the period due to the acquisitions of the flexible
accommodation service providers and growth in existing markets.
Cost of Services. Cost of services for the six months ended June 30,
1998 increased $17.0 million, or 107%, from $15.8 million in 1997 to $32.8
million in 1998. Cost of services as a percentage of revenues for the six months
ended June 30 increased from 73.4% in 1997 to 74.6% in 1998. The dollar increase
in cost of services was primarily related to the acquisition of the flexible
accommodation service providers. Cost of services as a percentage of revenues
increased as a result of higher leasing and maintenance costs in certain newly
acquired companies and lower occupancy rates in several markets.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the six months ended June 30, 1998 increased $5.4
million, or 122%, from $4.4 million in 1997 to $9.8 million in 1998. Selling,
general and administrative expense as a percentage of revenues for the six
months increased from 20.4% to 22.2% in 1998. The dollar increase in selling,
general and administrative expenses primarily was a result of the acquisitions
of the flexible accommodation service providers and increased corporate
overhead. The increase as a percentage of revenues is primarily a result of
increased corporate overhead. The increase in corporate overhead is a direct
result of hiring a corporate management team during the second half of 1997 and
other costs associated with creating a public company infrastructure. The
Company expects corporate overhead costs to remain relatively level during the
remainder of 1998. The Statement of Operations for the six months ended June 30,
1997 includes $1.2 million of non-recurring, non-cash compensation expense
relating to the accelerated vesting of restricted stock held by executive
officers. The compensation charge represents the difference between the value of
stock issued to officers and the amount paid. The Statement of Operations for
the six months ended June 30, 1998 includes a restructuring charge of $1.33
million related to a management realignment. See footnote 7 included in the
notes to the Consolidated Financial Statements for additional information.
Income Tax Provision. For the six months ended June 30, 1998 the
Company recorded a tax benefit of $140,553 on a pretax loss of $312,339,
compared to a tax provision of $518,020 on a pretax loss of $59,044 for the six
months ended June 30, 1997. The tax provision is based on the Company's
estimated consolidated effective tax rate for the 1998 fiscal year after
considering nondeductible goodwill expense.
LIQUIDITY AND CAPITAL RESOURCES - BRIDGESTREET
For the six months ended June 30, 1998, net cash used in operating
activities totaled $3.3 million. Net cash used in investing activities was $14.0
million, primarily for acquisitions (as described below) and the purchase of
operating stock and equipment required in the Company's business. Net cash
provided by financing activities was $9.8 million, primarily due to borrowings
against the revolving line of credit. Cash and cash equivalents decreased by
$7.4 million during the period and totaled $1.5 million at June 30, 1998.
In September 1997, the Company completed its initial public offering of
3,007,250 common shares, of which 2,092,250 shares were issued by the Company
and 915,000 shares were sold by certain stockholders of the Company at a public
offering price of $9.00 per share (the "Offering"). The net proceeds to the
Company (after deducting underwriting discounts and commissions and expenses
incurred in connection with the Offering) of approximately $14.8 million were
used to repay $1.0 million of certain indebtedness of the Founding Companies
assumed in connection with the Combination, $2.8 million (of which $1.0 million
related to acquisitions) of indebtedness outstanding under the Company's
revolving credit facility, $28,000 of the outstanding amount due under a loan
made to the Company by the spouse of one of the Company's directors, and
approximately $3.6 million for acquisitions and expenses associated with
acquisitions. The remaining net proceeds were invested in short-term, interest
bearing, investment grade securities at December 31, 1997, and subsequently were
used for acquisitions.
13.
<PAGE> 14
The Company has a revolving credit facility that provides the Company
with up to $25.0 million, secured by guarantees by certain material subsidiaries
of the Company and a pledge of the capital stock of all of the Company's
wholly-owned operating subsidiaries. The credit facility may be used for
refinancing of the Company's subsidiaries' indebtedness, acquisitions and
working capital. Loans made under the credit facility bear interest, at the
Company's option, at the bank's prime lending rate, or 1.5% above the Eurodollar
or LIBOR rates. The credit facility will terminate on March 31, 2002, or sooner
at the discretion of the Company, and all amounts outstanding thereunder (if
any) will be due upon such termination. The credit facility (i) prohibits the
payment of dividends and other distributions by the Company, (ii) generally will
not permit the Company to incur or assume other indebtedness and (iii) requires
the Company to comply with certain financial covenants. The Company had $0 and
$7.7 million outstanding under the facility at December 31, 1997 and June 30,
1998, respectively.
On March 31, 1997, the Company acquired Home Again, Inc. and two
affiliates ("Home Again") in a stock-for-stock merger and issued 475,000 shares
of Common Stock as merger consideration. The acquisition has been accounted for
using the purchase method of accounting. The Company has recorded approximately
$2.3 million of goodwill related to the transaction that is being amortized over
a period of 35 years. Home Again had combined revenues of approximately $1.2
million for the three months ended March 31, 1997.
Between April 1 and December 31, 1997, the Company made three
additional acquisitions. The acquisitions have been accounted for using the
purchase method of accounting. The aggregate cost of these acquisitions was
$6.75 million, consisting of $4.4 million of cash and $2.35 million of stock.
The preliminary purchase price allocation of these acquisitions resulted in
goodwill of approximately $7.25 million that is being amortized over 35 years.
Details of these acquisitions are noted below.
On June 30, 1997, the Company acquired for cash all the assets of
Corporate Housing Services ("CHS"), a provider of flexible accommodation
services in the Memphis, Tennessee metropolitan area. The cost of the
acquisition was funded through borrowings from the Company's revolving line of
credit. CHS's assets and operations were merged into BridgeStreet's Memphis
subsidiary, Temporary Housing Experts, Inc.
On December 1, 1997, the Company acquired certain assets of
Accommodations by Apple, Inc. ("ABA of Dallas"), a Texas flexible accommodation
company servicing Dallas and surrounding cities. The purchase consideration
included cash, funded from the proceeds of the Company's IPO, and the issuance
of 151,000 shares of common stock.
On December 1, 1997, the Company acquired certain assets of
Accommodations by Apple, Inc. ("ABA of Phoenix"), an Arizona flexible
accommodation company servicing several markets including Phoenix, Tucson and
Scottsdale. The purchase consideration included cash, funded from the proceeds
of the Offering, and the issuance of 71,000 shares of common stock.
Subsequent to December 31, 1997, the Company has acquired seven
companies. The acquisitions have been accounted for using the purchase method of
accounting. The total aggregate cost of these acquisitions was approximately
$16.3 million, consisting of cash and notes of $12.1 million and $4.2 million in
common stock or securities exchangeable for common stock. The preliminary
purchase price allocation of these acquisitions resulted in goodwill of
approximately $17.0 million that is being amortized over 35 years. Details
regarding these acquisitions are noted below.
On January 2, 1998, the Company acquired all the assets of Home on the
Road, Inc. of Charlotte, a North Carolina flexible accommodation company
servicing Charlotte and surrounding cities. The purchase consideration consisted
of cash, funded from the proceeds of the Offering, and a promissory note. Home
on the Road, Inc. had revenues of $2.2 million in 1997.
14.
<PAGE> 15
On January 2, 1998, the Company acquired all the outstanding stock of
Home on the Road-Raleigh, a North Carolina flexible accommodation company
servicing several markets including Raleigh, Durham, Research Triangle Park,
Winston-Salem and Greensboro. The purchase consideration of the acquisition was
the issuance of 75,000 shares of common stock. Home on the Road-Raleigh had
revenues of $1.3 million in 1997.
On January 2, 1998, the Company acquired for cash certain assets of
Accommodations by Apple-Denver and Accommodations by Apple-Austin, two flexible
accommodation companies servicing several markets in the Denver metropolitan
area including Colorado Springs, Boulder and Fort Collins, and in Austin, Texas,
and surrounding cities. The purchase consideration of the two acquisitions was
cash, funded from the proceeds of the Offering, and notes. The acquisitions had
revenues of approximately $2.6 million in 1997.
On February 19, 1998, the Company acquired all the issued and
outstanding stock of London Life Apartments, Inc. ("London Life"), a flexible
accommodation company servicing London, U.K. The purchase consideration
consisted of cash and the issuance of approximately 165,000 shares of common
stock. London Life had revenues of approximately $10.0 million in 1997.
On March 2, 1998, the Company acquired all the issued and outstanding
stock of Global Travel Apartments, Inc. ("GTA"), one of Canada's largest
providers of flexible accommodation services. GTA services the Toronto,
Montreal, Ottawa, Edmonton, Regina, Vancouver and Victoria markets. The purchase
consideration consisted of cash and the issuance of approximately 139,000 shares
of the stock of a Canadian subsidiary that is exchangeable for an equal number
of shares of common stock of the Company. GTA had revenues of approximately $7.7
million for the eleven months ended January 31, 1998.
On June 1, 1998, the Company acquired for cash certain assets of
Gracious Corporate Lodging, a California flexible accommodation company
servicing Santa Clara, Palo Alto and San Jose, California, and Austin, Texas.
The purchase consideration of the acquisition was cash, funded from borrowings
against the Company's revolving line of credit. Gracious Corporate Lodging had
revenues of approximately $6.4 million in 1997.
The Company will continue to pursue growth through the acquisition of
flexible accommodation service providers. The Company's primary sources of
funding to date have been cash flow from operations, proceeds from the Offering
and its revolving credit facility. The Company anticipates that cash flow from
operations and funds from its revolving credit facility will be its principal
future sources of funding. The Company's principal future uses of cash, in
addition to cash used in operating activities, include funding of acquisitions
and investment in the Company's management information systems. The Company does
not plan to make any material capital expenditures for leasehold improvements.
Capital expenditure requirements in 1998 are anticipated to be approximately
$2.9 million. During the six months ended June 30, 1998, the Company had capital
expenditures of $1.8 million. While there can be no assurance, management
believes that cash flow from operations and funds from the revolving credit
facility will be adequate to meet the Company's capital requirements for the
next 12 months, depending on the size and methods of financing potential
acquisitions.
INFLATION
Due to the relatively low levels of inflation experienced in 1997 and
1998, inflation did not have a significant affect on the results of the Company
during these periods.
SEASONALITY
Quarterly earnings may be affected by the timing of certain holidays,
business and vacation patterns, weather conditions, economic factors and other
considerations affecting travel. Corporate relocation activity peaks in the
summer months and declines significantly during the fourth quarter and the first
part of the first quarter. Long-term consulting activity tends to follow a
similar pattern, but not to the same extent. The Company expects to realize
lower revenues, operating income and net income during the first and fourth
quarters.
15.
<PAGE> 16
MANAGEMENT INFORMATION SYSTEMS
The Company was formed in August 1996, and during the first quarter of
1997, acquired five companies. Subsequent to the first quarter, the Company
acquired three additional companies in 1997, and through June 30, 1998, acquired
seven additional companies. The acquired companies each have their own unique
operating systems. As a result of these acquisitions, the Company has undertaken
a complete review of its computer software programs and operating systems. The
Company plans to replace all current accounting and property management systems
with a single integrated system. Year 2000 compliance is a requirement for all
new systems the Company will acquire or internally develop. The total cost to
replace existing software, hardware and the cost of implementation is estimated
to be $2.5 million, which will be capitalized as incurred. New system
implementation is expected to be completed by July 1, 1999. For the six months
ended June 30, 1998, the Company incurred approximately $600,000 in expenditures
related to new systems.
The Company is working with its processing banks to ensure their
systems are Year 2000 compliant. All of these costs will be borne by the
processing banks. In the event some of the processing banks are unable to
convert their systems, the Company will switch to banks that are able to perform
the processing requirements of the Company.
FACTORS TO BE CONSIDERED
The information set forth above contains forward-looking statements,
which involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward-looking statements.
Readers should refer to discussion under "Risk Factors" contained in the
Company's Registration Statement on Form S-4 (No. 333-39187) filed with the
Securities and Exchange Commission, which is incorporated herein by reference,
concerning certain factors which could cause the Company's actual results to
differ materially from the results anticipated in the forward-looking statements
contained herein.
16.
<PAGE> 17
PART II
ITEM 1. LEGAL PROCEEDINGS: None
- -----------------------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS: None
- -----------------------------------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES: None
- -------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE ON SECURITY HOLDERS:
- ---------------------------------------------------------------------
At BridgeStreet Corporation's Annual Meeting of Stockholders held on May
19, 1998, the following proposals were adopted by the margins indicated.
<TABLE>
<CAPTION>
Number of Shares
Voted for Withheld
--------- --------
1. To elect a board of directors to hold office until the next annual meeting of
stockholders or until their respective successors have been duly elected and
qualified.
<S> <C> <C>
James Biggar 6,902,913 2,075
Lynda Clutchey 6,902,413 2,575
Rocco Di Lillo 5,820,658 1,084,330
William Hulett, III 5,821,208 1,083,780
Robert Mesel 6,903,013 1,975
Connie O'Briant 6,903,013 1,975
Melanie Sabelhaus 6,883,995 20,993
Jerry Sue Thornton 6,902,513 2,475
Paul Verrochi 6,902,913 2,075
</TABLE>
<TABLE>
<CAPTION>
Number of Shares
Voted for Voted Against Abstain Non-Vote
--------- ------------- ------- --------
<S> <C> <C> <C> <C>
2. For the approval of the Company's 1997 Equity 4,255,427 1,036,095 12,850 1,330,416
Incentive Plan, as amended to date.
Number of Shares
Voted for Voted Against Abstain Non-Vote
--------- ------------- ------- --------
<S> <C> <C> <C> <C>
3. For the approval of the Company's 1998 5,493,707 63,215 9,050 1,339,016
Stock Purchase Plan.
</TABLE>
ITEM 5. OTHER INFORMATION:
- -----------------------------------
Subsequent to the Company's May 1998 Annual Meeting of Stockholders,
William N. Hulett, III resigned as President and Chief Executive Officer (but
continued on the Board of Directors as its Vice Chairman), Rocco A. Di Lillo
resigned as Chief Operating Officer, and Messrs. Biggar and Mesel resigned from
the Board of Directors. To fill the vacancies resulting from the resignations of
Messrs. Hulett and Di Lillo, on June 8, 1998, Mr. John E. Danneberg was elected
to be President, Chief Executive Officer, Chief Operating Officer and a director
of the Company. On July 29, 1998, Stephen J. Ruzika also was elected to serve as
a director of the Company.
17.
<PAGE> 18
The By-laws of the Company specify when a stockholder must submit
nominations for director or proposals for consideration at a stockholders'
meeting in order for those nominations or proposals to be considered in the
meeting. In order for the nominations or proposals to be considered at a
stockholders' meeting, the stockholder making them must have given timely notice
in writing to the Secretary of the Company. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive office of
the Company, 30670 Bainbridge Road, Solon, Ohio 44139, not less than 60 days nor
more than 90 days prior to the meeting; except that in the event that less than
70 days' notice or prior public disclosure of the date of the meeting is given
or made to stockholders, notice by the stockholder to be timely must be received
no later than the close of business on the 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made.
A stockholder's notice to the Secretary concerning nominations for
director shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the Company's books, of
such stockholder and (ii) the class and number of shares of the Company which
are beneficially owned by such stockholder.
A stockholder's notice to the Secretary with respect to other proposals
shall set forth as to each matter the stockholder proposes to bring before the
meeting (a) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on the Company's books, or the stockholder
proposing such business, (c) the class and number of shares of the Company which
are beneficially owned by the stockholder and (d) any material interest in the
stockholder in such business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
- ---------------------------------------------------
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K: The Company filed the following reports
on Form 8-K during the three months ended June 30, 1998.
- May 4, 1998 - Amendment to Form 8-K - Acquisition of London Life
Apartments, Limited
- May 14, 1998 - Amendment to Form 8-K - Acquisition of Global Travel
Apartments, Inc.
18.
<PAGE> 19
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.
BRIDGESTREET ACCOMMODATIONS, INC.
Date: August 10, 1998 By: /s/ John E. Danneberg
-----------------------------------------
John E. Danneberg
President and Chief Executive Officer
Date: August 10, 1998 By: /s/ Mark D. Gagne, CPA
-----------------------------------------
Mark D. Gagne, CPA
Chief Financial Officer
19.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001038078
<NAME> BRIDGESTREET ACCOMMODATIONS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,489,466
<SECURITIES> 0
<RECEIVABLES> 7,032,343
<ALLOWANCES> 200,000
<INVENTORY> 0
<CURRENT-ASSETS> 15,531,631
<PP&E> 5,897,757
<DEPRECIATION> 1,802,635
<TOTAL-ASSETS> 62,491,147
<CURRENT-LIABILITIES> 11,511,020
<BONDS> 7,901,715
0
0
<COMMON> 81,695
<OTHER-SE> 41,533,868
<TOTAL-LIABILITY-AND-EQUITY> 62,491,147
<SALES> 43,999,753
<TOTAL-REVENUES> 43,999,753
<CGS> 32,807,612
<TOTAL-COSTS> 32,807,612
<OTHER-EXPENSES> 11,596,612<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,886
<INCOME-PRETAX> (312,339)
<INCOME-TAX> (140,553)
<INCOME-CONTINUING> (171,786)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (171,786)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
<FN>
<F1>OTHER EXPENSES INCLUDE $1,330,000 OF RESTRUCTURING CHARGES RELATING TO A
REALIGNMENT OF SENIOR MANAGEMENT.
</FN>
</TABLE>
