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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[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 0-23059
HEALTHWORLD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3922288
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Avenue of the Americas
New York, New York 10013
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 966-7640
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 at May 10, 1999, 7,430,846 shares of Common Stock of the Registrant were
issued and outstanding.
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<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
<S> <C> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of
December 31, 1998 and March 31, 1999.................................... 1
Consolidated Statements of Income
for the Three Months
Ended March 31, 1998 and 1999........................................... 2
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1999.............................. 3
Notes to the Consolidated Financial Statements.......................... 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................................ 12
SIGNATURES....................................................................................... 13
EXHIBIT INDEX.................................................................................... 14
</TABLE>
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------------------ ------------------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 6,472 $ 9,350
Accounts receivable, net...................................... 18,889 20,244
Unbilled production charges................................... 3,151 3,406
Other current assets.......................................... 1,501 1,072
----------------------- -----------------------
Total current assets............................................... 30,013 34,072
Restricted cash.................................................... 1,860 1,811
Property and equipment, net........................................ 4,443 4,276
Goodwill, net...................................................... 14,266 14,129
Other assets....................................................... 289 489
----------------------- -----------------------
Total assets....................................................... $ 50,871 $ 54,777
======================= =======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................. $ 135 $ 113
Current portion of capitalized lease obligations.............. 74 65
Accounts payable.............................................. 4,247 2,526
Accrued expenses.............................................. 7,739 6,487
Advance billings.............................................. 7,982 14,644
Other current liabilities..................................... 302 279
----------------------- -----------------------
Total current liabilities.......................................... 20,479 24,114
Long-term debt..................................................... 116 113
Capitalized lease obligations...................................... 59 41
Minority interests................................................. 111 108
Deferred rent...................................................... 888 909
Other liabilities.................................................. 17 50
----------------------- -----------------------
Total liabilities.................................................. 21,670 25,335
----------------------- -----------------------
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding......................... -- --
Common stock, $.01 par value; 20,000,000 shares
authorized; and 7,415,167 and 7,430,195 shares
outstanding, respectively................................. 74 74
Additional paid-in capital.................................... 22,748 22,883
Retained earnings............................................. 6,357 6,667
Accumulated other comprehensive income........................ 22 (182)
----------------------- -----------------------
Total stockholders' equity......................................... 29,201 29,442
======================= =======================
Total liabilities and stockholders' equity......................... $ 50,871 $ 54,777
======================= ========================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
1
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1999
----------------- --------------
<S> <C> <C>
Revenues................................................ $ 13,988 $ 15,104
---------------- --------------
Operating expenses:
Salaries and related costs........................... 11,542 11,967
General and office expenses.......................... 1,904 2,312
Depreciation and amortization........................ 218 374
---------------- --------------
13,664 14,653
Income from operations.................................. 324 451
Interest income, net.................................... 190 107
---------------- --------------
Income before provision for income taxes
and minority interests............................... 514 558
Provision for income taxes (Note 2)..................... 210 245
Minority interests in net earnings of subsidiaries...... -- 3
================ ==============
Net income.............................................. $ 304 $ 310
================ ==============
Per share information (Note 3): Net income per common share:
Basic................................................. $ 0.04 $ 0.04
================ ==============
Diluted............................................... $ 0.04 $ 0.04
================ ==============
Common shares used in computing per share amounts:
Basic................................................. 7,415 7,421
================ ===============
Diluted............................................... 7,617 7,611
================ ===============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
2
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------
1998 1999
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 304 $ 310
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization................................... 218 374
Deferred rent................................................... 23 21
Deferred income taxes........................................... (9) --
Minority interests in net earnings of subsidiaries.............. -- 3
Loss (gain) on sale of fixed assets............................. 1 (1)
Changes in operating assets and liabilities:
Accounts receivable, net........................................ (2,957) (1,355)
Unbilled production charges..................................... (985) (255)
Other current assets............................................ (226) 429
Other assets.................................................... 169 (200)
Accounts payable................................................ (177) (1,721)
Accrued expenses................................................ 645 (1,235)
Advance billings................................................ 2,364 6,662
Other current liabilities....................................... -- (23)
Other liabilities............................................... (33) 33
----------------- -----------------
Net cash (used in) provided by operating activities.................. (663) 3,042
----------------- -----------------
Cash flows from investing activities:
Capital expenditures, net....................................... (259) (178)
Proceeds from the sale of fixed assets.......................... 25 15
----------------- -----------------
Net cash used in investing activities................................ (234) (163)
----------------- -----------------
Cash flows from financing activities:
Proceeds from exercise of stock options......................... -- 135
Repayments of long-term debt.................................... (464) (26)
Capital lease repayments........................................ (53) (23)
----------------- -----------------
Net cash (used in) provided by financing activities.................. (517) 86
----------------- -----------------
Effect of exchange rates on cash..................................... -- (87)
----------------- -----------------
Net (decrease) increase in cash and cash equivalents................. (1,414) 2,878
Cash and cash equivalents at beginning of period..................... 18,092 6,472
----------------- -----------------
Cash and cash equivalents at end of period........................... $ 16,678 $ 9,350
================= =================
Supplemental disclosure of cash flow information:
Cash paid for:
Taxes........................................................... $ 392 $ 812
================= =================
Interest........................................................ $ 36 $ 26
================= =================
Supplemental schedule of noncash investing activities:
Capital leases for new equipment ............................... $ 43 $ --
================= =================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
3
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
1. ORGANIZATION AND BUSINESS
On November 12, 1997, Healthworld Corporation acquired (the
"Consolidation"), in exchange for shares of its Common Stock, all of
the issued and outstanding common stock of each of (i) Girgenti,
Hughes, Butler & McDowell, Inc. and its affiliated entities ("GHB&M")
and (ii) Milton Marketing Group Limited and its subsidiaries
("Milton"). Unless otherwise indicated, all references herein to the
"Company" give effect to the Consolidation and include GHBM, Milton and
each of the Company's other subsidiaries. The Consolidation was
accounted for under the pooling of interests method of accounting.
The Company is an international communications and contract
sales marketing organization specializing in healthcare. The Company
provides many of the world's largest pharmaceutical and healthcare
companies with a comprehensive range of integrated strategic marketing
services designed to accelerate the acceptance of new products and to
sustain their growth. These integrated services include advertising and
promotion, contract sales, consulting, medical education, public
relations, marketing research, publishing, interactive multimedia and
database marketing services. The Company offers its clients global
reach and expertise through its operations in the United States,
France, Spain and the United Kingdom and through Healthworld B.V., a
world-wide network of marketing and communications agencies operating
under exclusive licensing agreements.
The accompanying unaudited consolidated financial statements
reflect all adjustments, consisting of normal recurring accruals, which
are, in the opinion of the Company's management, necessary to present
fairly the financial position as of March 31, 1999 and the results of
operations and cash flows for the interim periods ended March 31, 1998
and 1999. Interim results are not necessarily indicative of results for
a full year. For further information, refer to the consolidated
financial statements and the accompanying notes included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1998.
2. INCOME TAXES
Income taxes have been provided using the liability method in
accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes". The provision for income taxes
(recorded at an effective rate of 40.9% and 43.9% for the three months
ended March 31, 1998 and 1999, respectively) reflects management's
estimation of the effective tax rate that was and is expected to be
applicable for the respective fiscal years. This estimate is evaulated
by management each quarter.
3. NET INCOME PER COMMON SHARE
In accordance with SFAS No. 128, "Earnings Per Share", basic
earnings per common share amounts were computed by dividing net
earnings by the weighted average number of common shares outstanding,
excluding any potential dilution.
4
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HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
3. NET INCOME PER COMMON SHARE (Continued)
Diluted earnings per common share amounts were computed by reflecting
potential dilution from the exercise of stock options.
The following chart provides a reconciliation of information
used in calculating the per share amounts, for the three months ended
March 31, 1998 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1999
------------------------------- -----------------------------
(In thousands, except per share data)
<S> <C> <C>
Numerator:
Net income........................... $ 304 $ 310
------------------ -----------------
Denominator for basic
net income per common share.......... 7,415 7,421
Effect of dilutive securities:
Stock options........................ 202 190
------------------ -----------------
Denominator for diluted
net income per common share.......... 7,617 7,611
================== =================
Basic net income per common share $ 0.04 $ 0.04
================== =================
Diluted net income per common share $ 0.04 $ 0.04
================== =================
</TABLE>
4. COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income consists of
net income and foreign currency translation adjustments. No provision
for income taxes has been made with respect to foreign currency
translation adjustments because all earnings of foreign subsidiaries
are expected to be permanently reinvested outside the United States.
Comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1998 1999
--------------- --------------
<S> <C> <C>
Net income......................................... $ 304 $ 310
Other comprehensive income:
Foreign currency translation adjustments....... -- (204)
--------------- --------------
Comprehensive income............................... $ 304 $ 106
=============== ==============
</TABLE>
5
<PAGE>
HEALTHWORLD CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
5. SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131
establishes standards for reporting information about operating
segments and related disclosures about products and services,
geographic areas and major customers.
The Company is organized based on the services that it offers.
Under this organizational structure, the Company operates in two
principal operating segments: communications and contract sales. The
Company's communications operations provides integrated services to
clients which includes advertising and promotion, consulting, medical
education, public relations, publishing, database marketing,
interactive media and marketing research services. The Company's
contract sales operations involve forming dedicated sales teams to
provide clients with substantial flexibility in selecting the extent
and costs of promoting products as well as the clients' level of
involvement in managing the sales effort.
Segment information is as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
1998 1999
----------------- -----------------
<S> <C> <C>
Revenues:
Communications........... $ 5,453 $ 7,810
Contract Sales........... 8,535 7,294
----------------- -----------------
$ 13,988 $ 15,104
Income from operations:
Communications........... $ 30 $ 443
Contract Sales........... 294 8
----------------- -----------------
$ 324 $ 451
</TABLE>
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This March 31, 1999 Quarterly Report on Form 10-Q contains
statements which constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Those
statements include statements regarding the intent, belief or current
expectations of the Company and its management team. The Company's
stockholders and prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements. Such
risks and uncertainties include, among other things, competitive,
economic and regulatory factors in the healthcare marketing and
communications industry and the pharmaceutical and healthcare industry,
general economic conditions, the ability of the Company to manage its
growth and successfully implement its business strategy and other risks
and uncertainties that are discussed herein.
The following discussion and analysis should be read in
conjunction with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
Results of Operations
The following table sets forth certain consolidated income
statement data of the Company expressed as a percentage of revenues for
the periods indicated:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------------
1998 1999
-------------- -------------
<S> <C> <C>
Statement of Income Data:
Revenues........................................ 100.0% 100.0%
Operating expenses:
Salaries and related costs................. 82.5 79.2
General and office expenses................ 13.6 15.3
Depreciation and amortization.............. 1.6 2.5
-------------- -------------
97.7 97.0
Income from operations.......................... 2.3 3.0
Interest income, net ........................... 1.4 0.7
-------------- -------------
Income before provision for income taxes
and minority interests..................... 3.7 3.7
Provision for income taxes...................... 1.5 1.6
-------------- -------------
Net income ..................................... 2.2% 2.1%
============== =============
</TABLE>
7
<PAGE>
The following table sets forth certain operating data of the
Company with respect to the Company's communications and contract sales
operations for the periods indicated:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------------------
1998 1999
----------------- ---------------
(in thousands)
<S> <C> <C>
Revenues
Communications............... $ 5,453 $ 7,810
Contract sales............... 8,535 7,294
----------------- ---------------
$ 13,988 $ 15,104
Income From Operations
Communications............... $ 30 $ 443
Contract sales............... 294 8
----------------- ---------------
$ 324 $ 451
</TABLE>
Fiscal Three Months Ended March 31, 1999 Compared to Fiscal Three
Months Ended March 31, 1998.
Revenues
Revenues for the three months ended March 31, 1999 were $15.1
million, an increase of $1.1 million, or 8.0%, from $14.0 million for
the three months ended March 31, 1998.
Contract sales revenues decreased to $7.3 million, a decrease of
14.5% from $8.5 million in the prior year's quarter. This decrease was
primarily attributable to (i) approximately $1.5 million of revenue
lost as a result of a U.K. contract sales client filing for
receivership in the fourth quarter of 1998 and (ii) a decrease in
medical contract sales revenue of $724,000 resulting from the
discontinuation of the U.K. syndicated medical contract sales business.
These decreases were partially offset by revenues generated by the U.S.
contract sales division from new clients and revenues generated by the
U.K. contract sales division from new and existing clients.
Communications revenues increased to $7.8 million, an increase
of 43.2% from $5.5 million for the first quarter of 1998. Of such
increase, approximately $2.0 million was attributable to revenues
derived as a result of the acquisitions of HFT and its subsidiaries
(together, "the HFT Group Companies"), Colwood House Medical
Publications (UK) Limited ("Colwood") and CPA Espana, S.L. ("CPA
Spain"), collectively referred to herein as the "1998 Acquisitions",
while the remaining increase was primarily attributable to the growth
of advertising and promotion services in the U.S., which resulted from
assignments from new clients and additional assignments from existing
clients.
8
<PAGE>
Salaries and Related Costs
Salaries and related costs for the three months ended March 31,
1999 was $12.0 million, an increase of $425,000, or 3.7%, from $11.5
million for the three months ended March 31, 1998. Salaries and related
costs include all compensation and related benefits for all employees
and contracted talent. Such increase was primarily attributable to
approximately $1.3 million of additional salaries and related costs
associated with staffing to support additional revenues generated by
the 1998 Acquisitions partially offset by a $1.0 million decrease in
contract sales salaries commensurate with the decrease in contract
sales revenues. Salaries and related costs represented 79.2% of
revenues in the first quarter of 1999, compared to 82.5% in the first
quarter of 1998. Such decrease, as a percentage of revenues, was
primarily attributable to the decrease in revenues of the Company's
contract sales operations in relation to revenues generated by the
Company's communications business. Generally, labor costs associated
with the Company's contract sales operations are greater as a
percentage of corresponding revenues than those for the Company's
communications services.
General and Office Expenses
General and office expenses for the three months ended March 31,
1999 was $2.3 million, an increase of $408,000, or 21.4%, from $1.9
million for the three months ended March 31, 1998. General and office
expenses primarily include occupancy and related costs, client
development expenditures and other related administrative costs. Such
increase was attributable to $437,000 of additional expenses associated
with revenues generated by the 1998 Acquisitions. General and office
expenses represented 15.3% of revenues in the first quarter of 1999,
compared to 13.6% of the revenues in the first quarter of 1998.
Depreciation and Amortization
Depreciation and amortization for the three months ended March
31, 1999 was $374,000, an increase of $156,000 or 71.6% from $218,000
for the three months ended March 31, 1998. The increase was primarily
related to amortization expense associated with the goodwill generated
in connection with the 1998 Acquisitions, which acquisitions were
accounted for by the purchase method of accounting. Depreciation and
amortization represented 2.5% of revenues for the first quarter of
1999, compared to 1.6% for the first quarter of 1998.
Income From Operations
Income from operations for the three months ended March 31, 1999
was $451,000, an increase of $127,000, or 39.2%, from $324,000 for the
three months ended March 31, 1998. Income from operations represented
3.0% of revenues for the first quarter of 1999, compared to 2.3% for
the first quarter of 1998.
Interest Income, Net
Interest income, net for the three months ended March 31, 1999
was $107,000, a decrease of $83,000, or 43.7%, from $190,000 for the
three months ended March 31, 1998,
9
<PAGE>
resulting primarily from decreased cash balances resulting from the
initial cash payments made in connection with the 1998 Acquisitions.
Provision for Income Taxes
The provision for income taxes for the three months ended March
31, 1999 was $245,000, an increase of $35,000 from $210,000 for the
three months ended March 31, 1998. The provision for income taxes,
based on management's estimates of the effective year-end rate, was
recorded at an effective rate of 40.9% and 43.9% for the three months
ended March 31, 1998 and 1999, respectively. The increase in the
estimated effective rate is due to nondeductible amortization expense
in connection with the 1998 Acquisitions.
Net Income
Net income for the three months ended March 31, 1999 was
$310,000, an increase of $6,000, or 2.0%, from $304,000 for the three
months ended March 31, 1998. Net income represented 2.1% of revenues
for the first quarter of 1999 compared to 2.2% for the first quarter of
1998.
Liquidity and Capital Resources
In November 1997, the Company consummated its IPO, pursuant to
which the Company issued and sold an aggregate of 2,415,000 shares of
Common Stock (including 315,000 shares issued and sold in December 1997
pursuant to the exercise by the underwriters of an over-allotment
option) at a per share price of $9.00. The net proceeds received by the
Company in the IPO were $16.4 million, after deducting underwriting
discounts and commissions, an underwriters' non-accountable expense
allowance and other expenses payable by the Company in connection with
the IPO.
During the first quarter of 1999, cash provided by operations
was approximately $3.0 million, which consisted of net income for the
period of $310,000, non-cash charges of $397,000 and an increase in
advance billings of $6.7 million. This was partially offset by an
increase in accounts receivable of approximately $1.4 million, a
decrease in accounts payable of approximately $1.7 million and a
decrease in accrued expenses of approximately $1.2 million. Cash used
in investing activities was $163,000 and was primarily attributable to
net capital expenditures of $178,000. Cash provided by financing
activities was $86,000, and resulted from $135,000 received by the
Company in connection with the exercise of stock options less payments
of bank loans and capital leases of $26,000 and $23,000, respectively.
The Company's working capital was approximately $10.0 million
at March 31, 1999, compared to approximately $9.5 million at December
31, 1998. The increase in working capital at March 31, 1999, as
compared to December 31, 1998, was primarily attributable to the
current periods' operating income of $451,000.
The Company maintains relationships with a number of banks in
the United States and Europe which have extended various secured and
unsecured, committed and uncommitted lines of credit in amounts
sufficient to meet the Company's cash needs. At
10
<PAGE>
March 31, 1999, the Company had a $3.5 million secured, uncommitted
line of credit in the United States expiring June 30, 1999 (currently
being renegotiated), and secured and unsecured, committed lines of
credit and overdraft facilities outside of the United States in an
aggregate amount of approximately $1.9 million. The Company has no
amounts outstanding to date under such lines of credit or overdraft
facilities.
In July 1998, the Company acquired the HFT Group
Companies, a French healthcare communications agency. The Company's
initial cash purchase price was 20.3 million French Francs
(approximately US$3.4 million) including expenses related to the
acquisition. Total amounts to be paid in connection with the
acquisition, including potential, future earn-out payments to take
place on or prior to April 15, 2000 and April 15, 2002 based upon a
multiple of operating income of the HFT Group Companies and the
seller's option to sell and the Company's option to purchase the
remaining 20% of the capital stock of HFT, will not exceed 48.0 million
French Francs (approximately US$8.1 million).
In July 1998, the Company acquired all of the capital stock of
Colwood, a United Kingdom medical education company. The Company's
initial cash purchase price was (pound)4.5 million (approximately
US$7.5 million) including expenses related to the acquisition. Total
amounts to be paid in connection with the acquisition, including
potential, future earn-out payments to take place in April 2000 and
August 2001 based upon Colwood achieving certain targeted operating
profits, are not to exceed approximately (pound)8.0 million
(approximately US$13.3 million).
Pursuant to the acquisition agreement with respect to the
Colwood transaction, the Company deposited an amount equal to
(pound)1.0 million (approximately US$1.7 million) in an
interest-bearing escrow account to be applied towards the potential,
future earn-out payments to be made in April 2000 and August 2001, and
may be required to deposit into such escrow account additional amounts
based on net operating profits to be applied towards such potential,
future earn-out payments. Accordingly, such committed amounts will not
be available for working capital purposes.
In October 1998, the Company acquired all of the capital stock
of CPA Spain, a healthcare communications agency located in Madrid,
Spain. The Company's initial cash purchase price was approximately 261
million Spanish Pesetas (approximately US$1.9 million) including
expenses related to the acquisition. Total amounts to be paid in
connection with the acquisition, including potential, future earn-out
payments to take place in April 2000 and April 2003 based upon CPA
Spain achieving certain targeted operating profits, are not to exceed
approximately 710 million Spanish Pesetas (approximately US$5.1
million).
In connection with the Consolidation, the Company will pay to
one of Milton's former minority stockholders no later than July 31,
1999 an amount in cash up to approximately $320,000 based on the
profits earned by PDM Communications Limited.
Management believes that cash generated from the Company's
operations and available to the Company under various lines of credit
are adequate to support its short-term cash requirements for capital
expenditures and maintenance of working capital.
11
<PAGE>
Impact of Year 2000
The Year 2000 issue results from the inability of some
computer programs to identify the year 2000 properly, potentially
leading to errors or system failure. A company's business may be
adversely affected if it, or any of its suppliers, customers or other
third parties with whom it transacts business (including banks and
governmental agencies), have not resolved the Year 2000 issue in a
timely manner.
The Company's internal computing systems are primarily limited
to hardware and software for its financial systems, such as general
ledger, accounts receivable and accounts payable systems, and word
processing, database and graphic design systems. The Company is not
dependent on large legacy systems, and the Company believes that it
could replace any of its software or systems, if necessary, quickly and
at reasonable expense.
The Company has completed its internal review with respect to
Year 2000 issues. The Company does not believe Year 2000 issues, within
its internal information systems, will have a material adverse effect
on the Company's business, financial condition or results of
operations. The Company believes that its internal computer systems
used in its U.S. Operations and France are currently Year 2000
compliant, and that those used in its United Kingdom and Spanish
operations, to the extent not already Year 2000 compliant, will be made
Year 2000 compliant by June 1999.
The Company has completed its review of the Year 2000
readiness of its material clients and vendors in the United States and
France and believes, based solely upon inquiries made to such clients
and vendors, that such parties should not cause a material disruption
in the Company's business due to Year 2000 issues. The Company is
currently working with critical third parties in the United Kingdom and
Spain to determine the impact of Year 2000 issues on the various third
party businesses and operations in the United Kingdom and Spain and the
collateral impact, if any, on the business and operations of the
Company and the plans to address Year 2000 issues where third party
systems interface with the Company's systems.
To date, the cost of the Company's Year 2000 assessment and
compliance efforts has not been material to the Company's results of
operations or liquidity and the Company does not anticipate that the
cost of completing its assessment and compliance project will be
material to its results of operations or liquidity in 1999. The Company
is not aware, at this time, of any Year 2000 non-compliance that will
materially affect the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - The exhibits to this Form 10-Q are listed in the
accompanying Exhibit Index.
(b) Reports on form 8-K - None
12
<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.
HEALTHWORLD CORPORATION
Date: May 13, 1999 By: /s/ STEVEN GIRGENTI
--------------------------------------------
Steven Girgenti
Chairman and Chief Executive Officer
Date: May 13, 1999 By: /s/ STUART DIAMOND
--------------------------------------------
Stuart Diamond
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
Number Description of Exhibits
27.01 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Healthworld consolidated balance sheets and statements of income for the three
months ended march 31, 1999 and is qualified in its entirety by reference to
such Form 10Q
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,350
<SECURITIES> 0
<RECEIVABLES> 20,244
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 34,072
<PP&E> 8,497
<DEPRECIATION> 4,221
<TOTAL-ASSETS> 54,777
<CURRENT-LIABILITIES> 24,114
<BONDS> 0
0
0
<COMMON> 74
<OTHER-SE> 29,368
<TOTAL-LIABILITY-AND-EQUITY> 54,777
<SALES> 0
<TOTAL-REVENUES> 15,104
<CGS> 0
<TOTAL-COSTS> 14,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (107)
<INCOME-PRETAX> 558
<INCOME-TAX> 245
<INCOME-CONTINUING> 310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 310
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
