SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
============================
FORM 8-K / A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 12, 1998
HMG WORLDWIDE CORPORATION
===========================================================
(Exact name of Registrant as specified in its charter)
Delaware 0-13121 13-3402432
- ---------------------------- ------------------ --------------------------
(State or other jurisdiction (Commission File No.) (Employer Identification No.)
of incorporation)
475 Tenth Avenue, New York, New York 10018
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)736-2300
- --------------------------------------------------------------------------------
1
<PAGE>
This Current Report on Form 8-K / A-1 admends the Current Report on Form
8-K dated August 12, 1998 and filed on August 27, 1998 to add the financial data
as required by Item 7 of the Form.
Item 7 Financial Statements and Exhibits
(a) Financial Statements of Schutz International Inc.
(i) Independent Auditors' Report
(ii) Balance Sheets at June 30, 1998 (unaudited) and December 31, 1997
(iii)Statements of Operations for the six months ended June 30, 1998
(unaudited) and the years ended December 31, 1997 and 1996
(iv) Statements of Cash Flows for the six months ended June 30, 1998
(unaudited) and the years ended December 31, 1997 and 1996
(v) Statements of changes in Stockholders' Equity for the six months
ended June 30, 1998 (unaudited) and the years ended
December 31, 1997 and 1996
(vi) Notes to Financial Statements
(b) Pro Forma Financial Information (unaudited)
(i) Pro Forma Consolidated Balance Sheet at June 30, 1998 (unaudited)
(ii) Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1998 (unaudited) and the years ended
December 31, 1997 and 1996 (unaudited)
(iii)Notes to Pro Forma Combined Financial Statements
2
<PAGE>
Item 7 (a) Financial Statements of Schutz International Inc.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report 3
Financial Statements
Balance Sheets at June 30, 1998 (unaudited) and December 31, 1997 4
Statements of Operations for the six months ended June 30, 1998
(unaudited) and the years ended December 31, 1997 and 1996 5
Statements of Cash Flows for the six months ended June 30, 1998 (unaudited)
and the years ended December 31, 1997 and 1996 6-7
Statements of Changes in Stockholders' Equity for the six months ended
June 30, 1998 (unaudited) and the years ended December 31, 1997 and 1996 8
Notes to Financial Statements 9-13
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS OF
HMG WORLDWIDE CORPORATION
We have audited the accompanying balance sheet of SCHUTZ INTERNATIONAL
INC., as of December 31, 1997, and the related statements of operations, cash
flows and changes in stockholders' equity for each of the two years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SCHUTZ INTERNATIONAL INC.,
as of December 31, 1997, and the results of their operations and their cash
flows for each of the two years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
FRIEDMAN ALPREN & GREEN LLP
New York, New York
October 12, 1998
4
<PAGE>
SCHUTZ INTERNATIONAL INC.
BALANCE SHEETS
(in thousands, except share data)
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
ASSETS
Current Assets:
Cash $ 336 $ 150
Accounts receivable, less
allowance for doubtful
accounts of $104 and $92 1,939 3,669
Inventories 1,017 1,420
Due from Parent Company, tax benefit 1,793 1,522
Prepaid expenses and other current assets 143 166
------- ------
Total current assets 5,228 6,927
Property and equipment - net 2,836 2,885
------- ------
$ 8,064 $9,812
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 938 $1,121
Deferred revenue 581 549
Deferred compensation, current portion 25 25
Pension obligation, current portion 90 90
Other current liabilities 487 701
------- ------
Total current liabilities 2,121 2,486
Pension obligation 133 179
Due to Parent Company 694 1,489
Deferred compensation 231 250
------- ------
3,179 4,404
------- ------
Stockholders' equity
Common stock, par value $0.01; 1,000 shares
authorized, issued and outstanding - -
Retained earnings 4,885 5,408
------- ------
4,885 5,408
------- ------
$ 8,064 $9,812
======= ======
See accompanying notes to financial statements
5
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<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
(in thousands)
Six Months Ended June 30, Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Net revenues $7,915 $21,592 $26,109
Cost of revenues 5,375 15,516 17,737
------ ------- -------
Gross profit 2,540 6,076 8,372
Selling, general and
administrative expenses 3,306 8,624 9,823
------ ------- -------
Loss from operations (766) (2,548) (1,451)
Interest expense 28 113 250
------ ------- -------
Loss before allocated income tax benefit (794) (2,661) (1,701)
Allocated income tax benefit 271 873 656
------ ------- -------
Net loss ($ 523) ($ 1,788) ($ 1,045)
====== ======= =======
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30, Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $9,688 $21,621 $33,427
Cash paid to suppliers (7,363) (19,689) (23,628)
Cash paid to employees (1,243) (4,281) (4,786)
Interest paid (28) (113) (250)
------ ------- -------
Net cash provided by (used in)
operating activities 1,054 (2,462) 4,763
------ ------- -------
Cash flows from investing activities:
Redemption of (increase in) cash
surrender value of
Officers life insurance 2,415 (195)
Dividends paid (430)
Capital expenditures (71) (25) (27)
------ ------- -------
Net cash provided by (used in)
investing activities (71) 2,390 (652)
------ ------- -------
Cash flow from financing activities:
Net borrowings from (payments to)
Parent Company (797) 37 (4,086)
------ ------- -------
Net cash provided by (used in)
financing activities (797) 37 (4,086)
------ ------- -------
Net increase (decrease) in cash 186 (35) 25
Cash at the beginning of period 150 185 160
------ ------- -------
Cash at the end of period $ 336 $ 150 $ 185
====== ======= =======
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS - continued
(in thousands)
Six Months Ended June 30, Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Reconciliation of net loss
to net cash provided by (used in)
operating activities:
Net loss ($ 523) ($1,788) ($1,045)
Adjustments to reconcile net
loss to net cash provided by (used in)
operating activities:
Allocated tax benefit (271) (873) (121)
Depreciation 120 256 256
Decrease (increase) in assets
Accounts receivable 1,730 (2,172) 3,757
Inventories 403 1,200 37
Prepaid expenses 23 58 3,277
Increase (decrease) in liabilities
Accounts payable (183) 336 (1,022)
Deferred revenue 32 290 (82)
Deferred compensation (17) (17) (16)
Other liabilities and pension obligation (260) 248 (278)
------ ------- -------
$1,054 ($ 2,462) $4,763
====== ======= =======
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
Total
Common Stock Retained Stockholders'
------------
Shares Amount Earnings Equity
------ ------ -------- ------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 1,000 $- $8,671 $8,671
Dividends paid (430) (430)
Net loss - - (1,045) (1,045)
----- -- ------ ------
Balance at December 31, 1996 1,000 - 7,196 $7,196
Net loss - - (1,788) (1,788)
----- -- ------ ------
Balance at December 31, 1997 1,000 - 5,408 5,408
Net loss - - (523) (523)
----- -- ------ ------
Balance at June 30, 1998 1,000 $- $4,885 $4,885
===== == ====== ======
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
SCHUTZ INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Significant Accounting Policies
Organization: Schutz International Inc. (the "Company") was incorporated in
Delaware in 1989 and is a wholly-owned subsidiary of HWO Ventures, Inc. The
Company, using its marketing resources and expertise, is engaged in the design,
development, production and assembly of in-store, or point-of-purchase,
marketing and merchandising fixture and display systems. The Company's
operations are conducted principally in Morton Grove, Illinois. The balance
sheet as of June 30, 1998 and the related statements of operations and cash
flows for the six months ended June 30, 1998, have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include all
recurring adjustments) necessary to present fairly financial position, results
or operation and cash flows at June 30, 1998 have been made. The results of
operations for the period ended June 30, 1998 are not necessarily indicative of
the operating results for the full year.
Use of Estimates: Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Cash and Cash Equivalents: The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Inventory: Inventory, consisting principally of merchandising display
components, is stated at the lower of cost or market on a First-in-First-out
basis.
Property and Equipment: Property and equipment are stated at cost.
Equipment under capital leases are recorded at the present value of minimum
lease payments at the inception of the lease. Depreciation is computed based
upon the estimated useful lives of the assets using the straight-line method.
Equipment held under capital leases and leasehold improvements are amortized on
the straight-line method over the shorter of the lease term or estimated useful
life of the asset.
Revenue Recognition: Revenue is recognized when a display or system is
shipped or when services are performed.
Research and Development: Research and development costs are charged to
operations as incurred.
Income Taxes: Income taxes are provided on the liability method on all
revenues and expenses included in the Statements of Operations, regardless of
the period in which such items are recognized for income tax purposes, except
for items representing a permanent difference between pre-tax accounting income
or loss and taxable income or loss (see Note 5). Under the liability method of
accounting for income taxes, deferred taxes are based on rates that are expected
to be in effect when temporary differences are scheduled to reverse. Deferred
income taxes have been immaterial to the Company's financial position and
results of operations and have not been recorded in the periods presented. The
Company files a consolidated tax return with its Parent Company and
subsidiaries. Accordingly, the Company has recognized an income tax benefit in
each of the periods presented as losses incurred by the Company during each
period were used to offset consolidated earnings.
Employee Benefit Plans: The Company sponsors a defined benefit and profit
sharing plans for its employees. For the defined benefit plans, the Company has
adopted SFAS No. 87 "Employers' Accounting for Pensions".
10
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<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 2 - Inventory
Inventory consisted of the following components at June 30, 1998 and
December 31, 1997:
<S> <C> <C> <C>
June 30, December 31,
1998 1997
---- ----
(unaudited)
(in thousands)
Finished goods $ 220 $ 312
Work-in-progress 369 452
Raw materials 428 656
----- -----
$1,017 $1,420
====== ======
Note 3 - Property and Equipment
The following is a summary of property and equipment, estimated useful
lives and accumulated depreciation at June 30, 1998 and December 31, 1997:
June 30, December 31,
Description 1998 1997 Estimated Useful Life
----------- ---- ---- ---------------------
(unaudited)
(in thousands)
Land $ 910 $ 910
Buildings 2,546 2,516 27 years
Equipment, furniture and fixtures 2,990 3,270 5-10 years
------ ------
6,446 6,696
Less: accumulated
depreciation (3,610) (3,811)
------ ------
$2,836 $2,885
====== ======
Depreciation expense for property and equipment for the six months ended
June 30, 1998 and the years ended December 31, 1997 and 1996 was approximately
$120,000, $256,000 and $256,000, respectively.
</TABLE>
11
<PAGE>
SCHUTZ INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 4 - Employee Benefit Plans
Pension Plan
The Company has a pension plan covering all eligible employees. The pension
plan was frozen effective December 31, 1995. Pension expense (income) was for
the six months ended June 30, 1998 and the years ended December 31, 1997 and
1996 was $0, ($77,000) and ($115,000), respectively. The Company's actuarial
assumptions are based upon an expected return on assets of 7.4% and a discount
rate of 6%. The following is a summary of the components of pension costs for
the periods ending December 31, 1997 and 1996:
For the Years Ended December 31,
--------------------------------
1997 1996
---- ----
Net periodic cost
Service cost - benefits earned
during the period with interest $ 17 $ 27
Actual return on assets - net (94) (142)
------ ------
Net periodic pension cost (benefit) ($ 77) ($ 115)
====== ======
Accumulated pension obligation:
Vested benefits obligation ($1,090) ($2,173)
Fair market value of plan assets 743 1,712
------ ------
Fund status of projected benefit obligation (347) (461)
Adjustment to recognize minimum liability 78 78
------ ------
Accrued pension benefit obligation (269) (383)
Less: current portion 90 90
------ ------
Pension obligation, long-term ($ 179) ($ 293)
====== ======
Profit Sharing Plan
The Company participates in a defined contribution plan with its Parent
Company. Company contributions to the plan are determined by the Board of
Directors of the Company and are discretionary. There were no contributions made
for the six months ended June 30, 1998 and the years ended December 31, 1997 and
1996.
Deferred Compensation Plan
The Company has deferred compensation agreements with former officers of
the Company which provide payments over 10 years beginning at age 60, or death.
For the six months ended June 30, 1998 and the years ended December 31, 1997 and
1996, the Company charged to operations $30,000, $77,000 and $68,000 in deferred
compensation expenses, respectively.
12
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<TABLE>
<CAPTION>
SCHUTZ INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 5 - Allocated Income Taxes
The components of the provisions for allocated income taxes are as follows:
For the Six Months Ended For the Years Ended December 31,
--------------------------------
June 30, 1998 1997 1996
------------- ---- ----
(unaudited)
<S> <C> <C> <C>
(in thousands)
Current:
Federal $257 $829 $623
State 14 44 33
---- ---- -----
$271 $873 $656
==== ==== ====
Note 6 - Lease Commitments
The Company leases warehousing and office facilities and production and
office equipment and vehicles under leases expiring at various dates. At
December 31, 1997, future minimum payments under noncancellable operating leases
are as follows:
Year Amount
---- ------
(in thousands)
1998 $ 72
1999 29
2000 10
----
$111
Rent expense for the six months ended June 30, 1998 and the years ended
December 31, 1997 and 1996 was approximately $160,000, $382,000 and $370,000,
respectively.
Note 7 - Significant Clients
Net revenues from three clients comprised 40% and 36% of net revenues for
the years ended December 31, 1997 and 1996, respectively.
</TABLE>
13
<PAGE>
SCHUTZ INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -continued
Note 8 - Related Party Transactions
The Company was allocated certain charges from its Parent Company which
were charged to operations as follows:
For the Six Months Ended For the Years Ended December 31,
--------------------------------
June 30, 1998 1997 1996
------------- ---- ----
Management Fee $268
Insurance expense $ 7 39
Interest expense $28 113 250
--- ---- ----
$28 $120 $557
=== ==== ====
Note 9 - Litigation
Environmental
The Company was a plaintiff in a suit in which a parcel of land purchased
by the Company in 1990 was contaminated prior to its purchase. The Company filed
a suit against the prior owner for not informing the Company of the
contamination and against the testing company for failing to detect the
contamination. For the years ended December 31, 1997 and 1996 the Company
incurred $497,000 and $612,000, respectively, in legal and environmental
consulting costs to support its lawsuit.
The lawsuit with the prior owner was settled in 1997. The Company received
$350,000 for damages and remediation expense for the property. The Company
provided a reserve of $350,000 as a component of accrued expenses at December
31, 1997 and all future expenses to remediate the property will be charged
against the reserve. In February 1998, the Company settled the suit with the
testing company whereby the Company received an additional $400,000 for damages
and remediation expense for the property which was also held as a reserve for
the future cost of remediation of the property.
Sherman Antitrust Act
In 1996, the Company and its past president were defendants in a suit
brought by the Department of Justice. The Department of Justice alleged the
Company and its past president were in violation of certain provisions of the
Sherman Antitrust Act. In 1997, the Company and its past president plead guilty
to certain charges. The Company was assessed a fine of $500,000 which was
charged to operations for the year ended December 31, 1997.
On May 13, 1998, the Company and its past president received notice that
they were defendants in a civil suit filed by Miller Brewing Company. The suit
seeks to recover damages for an alleged illegal conspiracy with other
co-conspirators to rig bids of point-of-sale displays sold to Miller Brewing
Company pursuant to the Department of Justice inquiry and settlement. The suit
seeks damages of $60 million to Miller Brewing Company. The Company
has denied any liability in excess of that covered by the above criminal action
and expects that Miller Brewing Company will be unable to prove its claim.
14
<PAGE>
Item 7 (b) Pro Forma Financial Statements
PRO FORMA FINANCIAL DATA
The following Pro Forma Balance Sheet at June 30, 1998 combine the
unaudited Balance Sheet of Schutz International Inc. ("Schutz") at June 30, 1998
with the unaudited Consolidated Balance Sheet of HMG Worldwide Corporation ("HMG
Worldwide") at June 30, 1998. The Pro Forma Statements of Operations (i) for the
six months ended June 30, 1998, combine the unaudited historical Statements of
Operations of Schutz and HMG Worldwide for such period as if the Acquisition
were consummated on January 1, 1998, (ii) for the year ended December 31, 1997
combine the audited historical Statements of Operations of Schutz and HMG
Worldwide for such period as if the Acquisition were consummated on January 1,
1997, (iii) for the year ended December 31, 1996 combine the audited historical
Statements of Operations of Schutz and HMG Worldwide for such periods as if the
Acquisition were consummated on January 1, 1996. The pro forma financial data
are not necessarily indicative of the actual operating results that would have
occurred or the future operating results that will occur as a consequence of
such transactions. The results of operations for the six months ended June 30,
1998 are not necessarily indicative of the Company's results of operations to be
expected for the full year.
15
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Balance Sheet
For the Six Months Ended
June 30, 1998
---------------------------------------------------
HMG Pro Forma Pro
Worldwide Schutz Adjustments Forma
--------- ------ ----------- -----
<S> <C> <C> <C> <C>
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 6,352 $ 336 ($ 336)(a) $ 6,352
Accounts receivable - net 12,427 1,939 104 (a) 14,470
Inventory 12,316 1,017 (48)(a) 13,285
Prepaid expenses 513 143 (129)(a) 527
Due from Parent Company, tax benefit 1,793 (1,793)(a)
Other current assets 250 250
-------- ------ --------
Total current assets 31,858 5,228 34,884
Property and equipment - net 4,821 2,836 (2,359)(a) 6,773
1,475 (b)
Excess cost over fair market value of 6,340 6,340
assets acquired - net 135 135
------- ------ --------
Other assets $43,154 $8,064 $48,132
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $15,410 $15,410
Accounts payable 11,274 $ 938 (293)(a) 11,919
Accrued employee compensation and benefits 1,432 115 (109)(a) 1,438
Deferred revenue 2,229 581 2,810
Accrued expenses 540 650 (b) 1,190
Other current liabilities 295 487 (363)(a) 419
------- ------ -------
Total current liabilities 31,180 2,121 33,186
Pension obligation 1,125 133 (133)(a) 1,125
Convertible debentures 2,200 2,200
Term loans 614 614
Due to Parent Company 694 (694)(a)
Note payable to HWO Ventures, Inc. 2,862 (b) 2,862
Other long-term liabilities 412 231 (231)(a) 412
------- ------ -------
35,531 3,179 40,399
------- ------ -------
Stockholders' equity:
Common stock 90 1 (1)(a) 91
1 (b)
Additional paid-in capital 34,798 109 (b) 34,907
Foreign currency translation adjustments (3) (3)
Accumulated deficit (27,262) 4,884 (4,884)(a) (27,262)
------- ------ -------
7,623 4,885 7,733
------- ------ -------
$43,154 $8,064 $48,132
======= ====== =======
See accompanying notes to pro forma financial statements
16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Statements of Operations
For the Six Months Ended
June 30, 1998
---------------------------------------------------
HMG Pro Forma Pro
Worldwide Schutz Adjustments Forma
--------- ------ ----------- -----
<S> <C> <C> <C> <C>
Net revenues $29,415 $7,915 $37,330
Cost of revenues 20,874 5,375 26,249
------- ------ -------
Gross profit 8,541 2,540 11,081
Selling, general and administrative $ 98 (d)
expenses 6,830 3,306 (116)(c) 10,118
------- ------ -------
Income (loss) from operations 1,711 (766) 963
Interest income 148 148
(131)(d)
Interest expense (782) (28) 28 (c) (913)
------- ------ -------
Income (loss) before income taxes 1,077 (794) 198
Income tax benefit (provision) (75) 271 (196)(e) (16)
------- ------ -------
Net income (loss) $ 1,002 ($ 523) $ 182
======= ====== =======
Basic earnings per shares
Net income (loss) per common and
common equivalent shares $ 0.11 $ 0.02
======= =======
Weighted average number of common
and common equivalent
shares outstanding 8,945 9,065
======= =======
Diluted earnings per share
Net income (loss) per common and
common equivalent shares and
assumed conversions $ 0.07 $ 0.02
======= =======
Weighted average number of common
and common equivalent shares
assumed conversions 11,446 11,546
======= =======
See accompanying notes to pro forma financial statements
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Statements of Operations - continued
For the Year Ended
December 31, 1997
---------------------------------------------------
HMG Pro Forma Pro
Worldwide Schutz Adjustments Forma
<S> <C> <C> <C> <C>
Net revenues $46,311 $21,592 $67,903
Cost of revenues 33,273 15,516 48,789
------- ------- -------
Gross profit 13,038 6,076 19,114
Selling, general and administrative $ 197 (d)
expenses 11,959 8,624 (1,258)(c) 19,522
------- ------- -------
Income (loss) from operations 1,079 (2,548) (408)
Interest income 323 323
(261)(d)
Interest expense (1,098) (113) 113 (c) (1,359)
Other income (expense) 267 267
------- ------- -------
Income (loss) before income taxes 571 (2,661) (1,177)
Income tax benefit (provision) (42) 873 (831)(e)
------- -------
Net income (loss) $ 529 ($ 1,788) ($ 1,177)
======= ======= =======
Basic earnings per share
Net income (loss) per common and
common equivalent shares $ 0.06 ($ 0.13)
======= =======
Weighted average number of common
and common equivalent
shares outstanding 8,638 8,738
======= =======
Diluted earnings per share
Net income (loss) per common and
common equivalent shares and
assumed conversions $ 0.05
=======
Weighted average number of common
and common equivalent shares
assumed conversions 11,206
=======
See accompanying notes to pro forma financial statements
18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Statements of Operations - continued
For the Year Ended
December 31, 1996
---------------------------------------------------
HMG Pro Forma Pro
Worldwide Schutz Adjustments Forma
--------- ------ ----------- -----
<S> <C> <C> <C> <C>
Net revenues $45,552 $26,109 $71,661
Cost of revenues 37,589 17,737 55,326
------- ------- -------
Gross profit 7,963 8,372 16,335
Selling, general and administrative $ 197 (d)
expenses 13,003 9,823 (1,201)(c) 21,822
------- ------- -------
Loss from operations (5,040) (1,451) (5,487)
Interest income 351 351
(261)(d)
Interest expense (834) (250) 250 (c) (1,095)
------- ------- -------
Loss before provision for
income taxes (5,523) (1,701) (6,231)
Income tax benefit (provision) (12) 656 (644)(e)
------- -------
Net loss ($ 5,535) ($ 1,045) ($6,231)
======= ======= =======
Basic earnings per share
Net loss per common and
common equivalent shares and
assumed conversions ($ 0.73) ($ 0.81)
======= =======
Weighted average number of common
and common equivalent shares
assumed conversions 7,614 7,714
======= =======
See accompanying notes to pro forma financial statements
19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Footnotes to Pro Forma Balance Sheet and Statements of Operations
(a) To eliminate specific assets and liabilities not acquired by the Company
(b) To record fair value of net assets acquired, inclusive of the issuance of
a Note Payable valued at $2.9 million and the issuance of 100,000 shares
of Common Stock of HMG Worldwide
(c) To eliminate Parent Company expense allocations, certain non-reoccurring
expenses and deferred compensation expense as follows:
For the Six Months Ended For the Years Ended December 31,
--------------------------------
June 30, 1998 1997 1996
------------- ---- ----
<S> <C> <C> <C>
Management fee $ 268
Insurance expense $ 7 39
Interest expense $ 28 113 250
Department of Justice settlement 500
Legal expense 60 177 214
Environmental remediation expense 26 497 612
Deferred compensation expense 30 77 68
---- ------ ------
$144 $1,371 $1,451
==== ====== ======
(d) To record additional depreciation expense based upon the fair market value
of property and equipment acquired and to record interest expense on the
$2.9 million Note Payable issued, bearing interest at 9% per anum
For the Six Months Ended For the Years Ended December 31,
--------------------------------
June 30, 1998 1997 1996
------------- ---- ----
Depreciation expense 98 197 197
Interest expense 131 261 261
(e) To adjust income tax provision based upon pro forma income before income
taxes
20
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: October 23, 1998 HMG WORLDWIDE CORPORATION
By: /s/ Robert V. Cuddihy, Jr.
--------------------------
Robert V. Cuddihy, Jr.
Principal Accounting Officer,
Chief Operating Officer and
Chief Financial Officer
21
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