<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: March 31, 2000
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: 0-13121
HMG Worldwide Corporation
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3402432
- --------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 12, 2000
- ---------------------------- ---------------------------
Common Stock, $.01 par value 13,091,076
<PAGE>
Part I. Financial Information
Item 1.
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
----------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,973 $ 577
Accounts receivable - less allowance
for doubtful accounts of $781 and $436 15,607 19,453
Inventory 26,395 33,730
Prepaid expenses 997 940
Other current assets 464 697
-------- --------
Total current assets 49,436 55,397
Property and equipment - net 9,877 9,938
Excess of cost over fair value
of assets acquired, less accumulated
amortization of $2,572 and $2,717 8,584 8,438
Deferred financing costs - net 1,966 1,833
Other assets 175 174
-------- --------
$ 70,038 $ 75,780
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations $ 21,565 $ 22,724
Accounts payable 19,078 20,318
Accrued employee compensation and benefits 950 1,195
Deferred revenue 1,051 204
Accrued expenses 1,045 935
Other current liabilities 317 326
-------- --------
Total current liabilities 44,006 45,702
Pension obligation 999 992
Convertible notes and debentures 7,000 7,500
Promissory note 1,600 1,600
Term loans 2,480 2,480
Other long-term liabilities 397 392
-------- --------
56,482 58,666
-------- --------
Stockholders' equity:
Common stock, par value $0.01; 50,000,000 shares
authorized; 12,029,225 and 12,992,586 shares
issued and outstanding 120 130
Additional paid-in capital 39,827 42,955
Accumulated deficit (26,391) (25,971)
-------- --------
13,556 17,114
-------- --------
$ 70,038 $ 75,780
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
Three Months Ended March 31,
----------------------------
1999 2000
---- ----
Net revenues $ 19,502 $ 23,435
Cost of revenues 13,751 16,687
------------ ------------
Gross profit 5,751 6,748
Selling, general and
administrative expenses 4,900 5,686
------------ ------------
Income from operations 851 1,062
Interest income 69 1
Interest expense (376) (634)
------------ ------------
Income before provision
for income taxes 544 429
Provision for income taxes 13 9
------------ ------------
Net income $ 531 $ 420
============ ============
Basic earnings per share
Net income per common shares $ 0.05 $ 0.03
============ ============
Weighted average number of common
shares outstanding 10,360,383 12,307,597
============ ============
Diluted earnings per share
Net income per common and common
equivalent shares $ 0.04 $ 0.03
============ ============
Weighted average number of common and
common equivalent shares 12,637,864 16,354,644
============ ============
See accompanying notes to consolidated financial statements.
3
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended March 31,
----------------------------
1999 2000
---- ----
Cash flows from operating activities:
Cash received from customers $ 18,606 $ 18,739
Interest received 65 1
Cash paid to suppliers (17,962) (23,550)
Cash paid to employees (4,854) (4,413)
Income taxes paid (15) (53)
Interest paid (365) (459)
-------- --------
Net cash used in operating
activities (4,525) (9,735)
-------- --------
Cash flows from investing activities:
Capital expenditures (160) (459)
-------- --------
Net cash used in investing
activities (160) (459)
-------- --------
Cash flows from financing activities:
Proceeds derived from the sale of
convertible notes 5,000 1,500
Proceeds derived from a credit
agreement, net 1,869 1,314
Proceeds from exercise of stock
options and warrants 38 2,139
Principal payments of
outstanding debt obligations (37) (155)
-------- --------
Net cash provided by
financing activities 6,870 4,798
-------- --------
Net increase (decrease) in cash and
cash equivalents 2,185 (5,396)
Cash and cash equivalents
at beginning of year 5,730 5,973
-------- --------
Cash and cash equivalents
at March 31 $ 7,915 $ 577
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(in thousands)
(unaudited)
Three Months Ended March 31,
----------------------------
1999 2000
---- ----
Reconciliation of net income
to net cash used in
operating activities:
Net income $ 531 $ 420
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 355 658
Decrease (increase) in assets:
Accounts receivable 1,119 (3,846)
Inventory (4,175) (7,335)
Prepaid expenses (352) 57
Other assets (62) (213)
Increase (decrease) in liabilities:
Accounts payable 316 1,240
Deferred revenue (2,006) (847)
Accrued expenses (224) (110)
Pension obligation 43 7
Other liabilities (70) 234
------- -------
Net cash used in operating
activities ($4,525) ($9,735)
======= =======
Non-cash financing activities:
Common stock issued in connection
with the conversion of debentures
and payment of interest $ 2,160 $ 1,067
See accompanying notes to consolidated financial statements.
5
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Consolidated Financial Statements
HMG Worldwide Corporation (the "Company") is a multi-disciplinary
marketing solutions agency, incorporated in 1984, providing in-store and online
marketing services to major consumer goods manufacturers and retailers for
brands, categories, departments, and stores. The Company's operations are
conducted principally through five operating whollyowned subsidiaries and a
recently acquired 80%- owned subsidiary being, respectively, HMG Worldwide
In-Store Marketing, Inc. ("HMG"), HMG Intermark Worldwide Manufacturing, Inc.
("HMG Intermark"), Display Depot, Inc. ("DDI"), HMG Griffith, Inc. ("HMG
Griffith"), HMG Schutz International Inc. ("HMG Schutz") and Ego Media, Inc.
("Ego Media"). The Company conducts its operations in New York, Illinois,
Pennsylvania and Toronto, Canada.
The Consolidated Balance Sheet as of March 31, 2000, and the Consolidated
Statements of Operations and Cash Flows for the three months ended March 31,
2000 and 1999, have been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
cash flows at March 31, 2000 and for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's December 31, 1999 annual
report to shareholders. The results of operations for the period ended March 31,
2000 are not necessarily indicative of the operating results for the full year.
Note 2 - Inventory
Inventory consisted of the following components at December 31, 1999 and
March 31, 2000.
December 31, March 31,
1999 2000
---- ----
(in thousands)
Finished goods $ 7,945 $ 6,209
Work-in-process 8,018 9,150
Raw materials 10,432 18,371
------- -------
$26,395 $33,730
Note 3 - Income Taxes
At December 31, 1999, the Company had net operating loss carry forwards of
approximately $34.6 million which expire during the years 2001 through 2014.
Components of income tax expense for the three months ended March 31, 1999
and 2000 are as follows:
Three Months Ended March 31,
1999 2000
---- ----
(in thousands)
State and local
income taxes $13 $ 9
=== ===
6
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
(unaudited)
Note 4 - Convertible Debentures and Convertible Notes
In February 2000, one institutional holder of the Company's Convertible
Notes elected to convert $1.0 million of the outstanding $5.0 million
Convertible Notes into Common Stock at $4.00 per share pursuant to the terms of
the notes. As a consequence of the conversion, the Company issued 266,675 shares
of Common Stock, inclusive of accrued interest, and retired $1.0 million of the
Notes.
On March 15, 2000, the Company issued $1.5 million 7% Convertible Notes
Due March 15, 2003 to an institutional investor. The principal amount of the
Convertible Notes is convertible into shares of the Company's Common Stock at a
conversion price $9.60 per share, provided that if the Company does not achieve
certain maintenance criteria, based upon revenues and pre-tax income, the
conversion price per share will be the lesser of $9.60 or an amount equal to the
average of the two lowest closing prices of the Common Stock during the 30
consecutive trading days immediately prior to conversion subject to a maximum
issuance of 375,000 shares, taken together. The Convertible Notes were issued
through a private placement; however, the Company has undertaken to register
under the Securities Act of 1933 for resale by the holders of the Convertible
Notes, the shares which may be acquired upon the conversion of the Convertible
Notes.
7
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
HMG Worldwide ("the Company") is a multi-disciplinary marketing solutions
agency. Initially, and until recently, the Company's vision was to be the
preeminent provider of in-store marketing services to major consumer goods
manufacturers and retailers for brands, categories, departments, and stores.
The Company succeeded in its original vision and has grown to become a
leading agency for in-store marketing services. The blue-chip clients that were
acquired during the Company's initial growth remain today as the core of an
enviable client list. Among the Company's valued clients are Clairol, Coca-Cola,
CVS, Hallmark, Kmart, Microsoft, Procter & Gamble, Sara Lee, Target, Wal*Mart
and many others.
To adapt to the changing economy and the expansion of e-commerce, the
company has evolved its vision to capitalize on the growth of the Internet and
new media.
Until recently, the Company's vision has been to increase its clients'
sales, increase labor efficiency, enhance retail branding, environment and
communication at the point-of-sale, and improve inventory management through
unique in-store branding, marketing, and merchandising systems. In fulfilling
its original vision, the Company has provided research, creative, design,
engineering, and manufacturing support services to its clients. Over the course
of decades of experience, the Company has developed an intimate knowledge of its
clients' brands and, more importantly, has compiled unequaled research on their
consumers' buying habits.
Ego Media
In September of 1999, the Company acquired an 80% interest in Ego Media.
Ego Media is a web-consulting, web-design, and web-branding group focused on
creating new-media marketing campaigns and online branding initiatives that
produce results for its clients. With Ego Media, the Company can provide its
services wherever purchase decisions are made.
The Company's vision is focused on the convergence of online and in-store
marketing. The Company will leverage decades-old client relationships with the
web-consulting expertise of Ego Media. The Company offers an advantage over its
competition by offering seamless multi-disciplinary marketing solutions that
cross the border between "brick and mortar" and "click and mortar" marketing.
Recent Developments
The Company's revenues for the three months ended March 31, 2000 grew
organically 20.2% to $23.4 million as compared to $19.5 million for the three
months ended March 31, 1999. The Company generated net income of $420,000, or
$0.03 basic earnings per share, net of the loss from operations of Ego Media of
$160,000 and the amortization expense of $114,000 for deferred financing costs
associated with the new financing and credit facilities consummated in August
1999. The Company generated net income of $531,000, or $0.05 per basic earnings
per share for the three months ended March 31, 1999.
In February 2000, one institutional holder of the Company's convertible
notes elected to convert $1.0 million of the outstanding $5.0 million
Convertible Notes into Common Stock at $4.00 per share pursuant to the terms of
the notes. As a consequence of the conversion, the Company issued 266,675 shares
of Common Stock, inclusive of accrued interest, and retired $1.0 million of the
Notes.
On March 15, 2000, the Company issued $1.5 million 7% Convertible Notes
Due March 15, 2003 to an institutional investor. The principal amount of the
Convertible Notes is convertible into shares of the Company's Common Stock at a
conversion price of $9.60 per share, provided that if the Company does not
achieve certain maintenance criteria, based upon revenues and pre-tax income,
the conversion price per share will be the lesser of $9.60 or an amount equal to
the average of the two lowest closing prices of the Common Stock during the 30
consecutive trading days immediately prior to conversion subject to a maximum
issuance of 375,000 shares, taken together. The Convertible Notes were issued
through a private placement; however, the Company has undertaken to register
under the Securities Act of 1933 for resale by the holders of the Convertible
Notes, the shares which may be acquired upon the conversion of the Convertible
Notes.
8
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Management believes that each of the above accomplishments and its
expansion into electronic commerce positions the Company well as a leading,
innovative agency providing multi-disciplinary solutions to achieving results
for its clients wherever purchase decisions are made and having the appropriate
resources to support each of its clients initiatives. Furthermore, the Company
will continue to seek to acquire strategic businesses which will expand the
Company's retail and e-tail products and services, provide improved distribution
and reduce operating and manufacturing costs.
Three Months Ended March 31, 2000 as Compared to the
Three Months Ended March 31, 1999
Net revenues increased $3.9 million, or 20.2%, to $23.4 million for the
three months ended March 31, 2000 as compared to $19.5 million for the three
months ended March 31, 1999. The $3.9 million increase in net revenues from
period to period was due principally to a net increase in marketing expenditures
of the Company's clients during the period as the Company was engaged in the
national roll out of several new merchandising programs during 2000.
Gross profit for the three months ended March 31, 2000 was $6.7 million as
compared to $5.7 million for the three months ended March 31, 1999. The increase
in gross profit of $1.0 million was principally a result of the increase in net
revenues, net of a decline in gross margin for the quarter. For the three months
ended March 31, 2000 and 1999, the Company's gross margin was 28.8% and 29.5%,
respectively. The gross margin decrease of 0.7% was due principally to the net
effect of (i) an favorable production revenue mix resulting in a 0.8% increase,
offset by (ii) an increase in factory overhead expenses of 1.5%. The increase in
factory overhead expense, as a percentage of revenues, was principally the
result of the Company's new warehouse and distribution center opened in
September 1999 to handle the increased warehousing and distribution needs of
many of the Company's retail clients.
Selling, general and administrative expenses ("SG&A") for the three months
ended March 31, 2000 was $5.7 million as compared to $4.9 million for the
comparable period in 1999. The increase in SG&A of $786,000 from period to
period was principally due to the addition of Ego Media's SG&A of $325,000,
amortization expense of $114,000 for deferred financing costs associated with
the new financing and credit facilities and an increased in other general
expenses of $347,000.
For the three months ended March 31, 2000, the Company generated interest
income of $1,000 as compared to $69,000 for the three months ended March 31,
1999. The decrease was principally attributable to a decrease in cash and cash
equivalents invested in interest-bearing marketable securities and commercial
paper from period to period.
Interest expense was $634,000 for the three months ended March 31, 2000 as
compared to $376,000 for the three months ended March 31, 1999. The increase in
interest expense was principally due to the combination of an increase in
average borrowings from period to period and an increase in the interest rate
incurred through the Company's credit facilities.
As a consequence of the foregoing factors, the Company generated net
income of $420,000, or $0.03 basic earnings per share, for the three months
ended March 31, 2000 as compared to a net income of $531,000, or $0.05 basic
earnings per share, for the three months ended March 31, 1999.
Stockholders' Equity
Stockholders' equity increased $3.5 million to $17.1 million at March 31,
2000 from $13.6 million at December 31, 1999. The increase in stockholders'
equity was due to (i) net income of $420,000, (ii) the issuance of 266,675
shares of Common Stock and the retirement of the outstanding convertible
debentures of $1.0 million, net of expenses, and (iii) net proceeds of $2.1
million derived from the exercise of stock options and warrants.
9
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
Income Taxes
At December 31, 1999, the Company had net operating loss carry forwards of
approximately $34.6 million which expire during the years 2001 through 2014.
The Company's income tax provision for the three months ended March 31,
2000 was $9,000 as compared to $13,000 for the three months ended March 31,
1999. The income tax provisions were comprised principally of state and local
taxes.
Inflation
The effect of inflation on the Company's operations has not been
significant to date.
Backlog
At March 31, 2000, the Company's aggregate backlog was approximately $61.4
million as compared to $48.9 million and $48.8 million at December 31, 1999 and
March 31, 1999, respectively. Of such aggregate backlog at March 31, 2000,
approximately 41% was attributable to three clients. The Company anticipates
that substantially all such backlog at March 31, 2000 will be filled during the
next twelve months. In addition to the $61.4 million backlog at March 31, 2000,
the Company's supply contract with the Foster Grant Group L.P. ("Foster Grant")
requires Foster Grant, subject to certain limitations, to purchase at least 70%
of its in-store merchandising displays from the Company with average annual
purchases to aggregate no less than $2.5 million. The aggregate value of the
Foster Grant supply contract at March 31, 2000 was $19.8 million, of which the
Company anticipates that $2.5 million will be shipped within the next twelve
months. Due to quarter to quarter fluctuations in the Company's backlog levels,
attributable to the timing, nature and size of its merchandising system programs
for its clients, such backlog levels are not necessarily an indicator of future
net revenue levels.
Liquidity and Capital Resources
Cash and cash equivalents at March 31, 2000 and December 31, 1999
aggregated $577,000 and $6.0 million, respectively. The Company's decrease in
cash and cash equivalents of approximately $5.4 million for the three months
ended March 31, 2000 was due principally to the net effects of (i) net cash used
in operations of $9.7 million and (ii) capital expenditures of $459,000, offset
by (iii) proceeds derived from the sale of $1.5 million, 7% Convertible Notes,
(iv) proceeds from exercise of stock options and warrants of $2.1 million, and
(v) net proceeds of $1.3 million derived from the Company's credit facilities.
The Company's negative cash flows from operations for the three months ended
March 31, 2000 resulted principally from a net increase in (i) accounts
receivable $3.8 million and (ii) inventory of $7.3 million.
The Company maintains a $35.0 million Credit Agreement with a financial
institution in the form of a revolving credit and term loan facility. Borrowings
under the Credit Agreement bear interest at the institution's prime rate plus
0.25% per annum or, at the option of the Company, the Eurodollar rate plus 2.5%
per annum. The Company is required to pay a quarterly commitment fee of 0.25%
per annum of the average daily unused amount of the funds available.
Additionally, the Credit Agreement contains certain customary affirmative and
negative covenants which require the Company to maintain certain financial
ratios and, among other things, restrict (i) declaration of dividends, (ii) the
incurrence of additional indebtedness and (iii) the sale of certain assets. As
of March 31, 2000, the Company was in compliance with all financial covenants of
the Credit Agreement, as amended.
Pursuant to the terms of the Credit Agreement, the lender advanced $3.1
million in the form of a term loan collateralized by the Company's current and
future real estate and equipment. The term loan portion of the Credit Agreement
is amortized on a quarterly basis over five years and bears interest at the
institution's prime rate plus 0.25% per annum. At March 31, 2000 the balance
outstanding under the term loan was $2.9 million.
10
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued
In February 2000, one institutional holder of the Company's Convertible
Notes elected to convert $1.0 million of the outstanding $5.0 million
Convertible Notes into Common Stock at $4.00 per share pursuant to the terms of
the notes. As a consequence of the conversion, the Company issued 266,675 shares
of Common Stock, inclusive of accrued interest, and retired $1.0 million of the
Notes.
On March 15, 2000, the Company issued $1.5 million 7% Convertible Notes
Due March 15, 2003 to an institutional investor. The principal amount of the
Convertible Notes is convertible into shares of the Company's Common Stock at a
conversion price of $9.60 per share, provided that if the Company does not
achieve certain maintenance criteria, based upon revenues and pre-tax income,
the conversion price per share will be the lesser of $9.60 or an amount equal to
the average of the two lowest closing prices of the Common Stock during the 30
consecutive trading days immediately prior to conversion subject to a maximum
issuance of 375,000 shares, taken together. The Convertible Notes were issued
through a private placement; however, the Company has undertaken to register
under the Securities Act of 1933 for resale by the holders of the Convertible
Notes, the shares which may be acquired upon the conversion of the Convertible
Notes.
The Company's working capital at March 31, 2000 was $9.7 million,
inclusive of borrowing of $22.7 million pursuant to the five-year Credit
Agreement. The working capital needs of the Company continue to expand as
increases in revenues direct to retailers require the Company to maintain a
substantial investment in inventory to manage new merchandising programs,
support existing merchandising programs, new store openings and remodeling
activities engaged by the retailer. From time to time, the Company experiences
temporary liquidity problems due to the timing of cash flows while the Company
is in production and building inventory. Additionally, the Company's working
capital was deployed in the recently completed capital expenditure program
whereby the Company developed a series of proprietary products that can be
marketed across a variety of different clients and retail store environments. In
addition, as the Company expands its Internet and e-commerce, HMGe division, the
timing of cash flows for this division will require support through the
Company's existing credit facilities and other potential resources.
In March 2000, the Company retained an investment banker, Friedman,
Billings and Ramsey, to advise the Company in the financing of its Internet
expansion as well as the increased working capital requirements of its
traditional core in- store marketing business. The Company may seek to raise
additional capital in order to provide a more rapid growth and expansion of its
HMGe division as the Company believes that there are significant opportunities
to grow this business unit, both organically and through strategic acquisitions.
The Company's management believes that its current cash and cash
equivalents, its backlog, anticipated future cash flows from operations,
availability under its Credit Agreement and issuance of Convertible Notes will
be sufficient to support its debt service requirements and its other capital and
operating needs for the next fiscal year. Management believes the Company's
investment in a strategic e-commerce division, an expanded client base and
future cash flows from operations developed by the Company provide an important
base for future revenues and liquidity; however, there can be no assurance that
such belief will prove to be correct, that additional financing will not be
required, or that any such financing will be available on commercially
reasonable terms or otherwise.
The above statements and certain other statements contained in this
quarterly report on Form 10-Q are based on current expectations. Such statements
are forward looking statements that involve a number of risks and uncertainties.
Factors that could cause actual results to differ materially include the
following (i) general economic conditions at retail, (ii) competitive market
influences, (iii) client budgetary restrictions, (iv) delays in shipment of
scheduled programs to clients, (v) delay in or inability to expand the Company's
client base and/or (vi) the loss of or reduction in spending of existing
clients.
11
<PAGE>
Part II Other Information
Item 6. Exhibits and Reports of Form 8-K
The following financial statement exhibits are filed as part of this Report:
INDEX TO FINANCIAL STATEMENT EXHIBITS
Page
----
Exhibit 11 - Computation of Per Share Earnings 14
Exhibit 27 - Financial Data Schedule 15
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.
HMG Worldwide Corporation
-------------------------
(Registrant)
Date: May 12, 2000 /s/ Robert V. Cuddihy, Jr.
------------ --------------------------
Robert V. Cuddihy, Jr.
Chief Financial Officer
(Principal Accounting Officer)
13
<PAGE>
HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share data)
(unaudited)
For the Three Months Ended March 31, 1999
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share:
Income available to
common stockholders $531 10,360 $0.05
=====
Effect of dilutive securities:
Stock options and warrants -- 2,278
---- ------
Diluted earnings per share:
Income available to common
stockholders $531 12,638 $0.04
==== ====== =====
For the Three Months Ended March 31, 2000
-----------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic earnings per share:
Income available to
common stockholders $420 12,308 $0.03
=====
Effect of dilutive securities:
Stock options and warrants -- 4,047
---- ------
Diluted earnings per share:
Income available to common
stockholders $420 16,355 $0.03
==== ====== =====
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 577
<SECURITIES> 0
<RECEIVABLES> 19,889
<ALLOWANCES> 436
<INVENTORY> 33,730
<CURRENT-ASSETS> 55,397
<PP&E> 13,438
<DEPRECIATION> 3,501
<TOTAL-ASSETS> 75,780
<CURRENT-LIABILITIES> 45,702
<BONDS> 0
0
0
<COMMON> 130
<OTHER-SE> 16,984
<TOTAL-LIABILITY-AND-EQUITY> 75,780
<SALES> 23,435
<TOTAL-REVENUES> 23,435
<CGS> 16,687
<TOTAL-COSTS> 5,686
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 634
<INCOME-PRETAX> 429
<INCOME-TAX> 9
<INCOME-CONTINUING> 420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 420
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
