UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB/A
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1997
------------------------------------------------
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________________________________________
Commission File Number: 0-23054
----------------------------------------------------------
HOSPITALITY WORLDWIDE SERVICES, INC.
(formerly Light Savers U.S.A., Inc.)
(exact name of registrant as specified in its charter)
NEW YORK 11-3096379
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
450 PARK AVENUE, SUITE 2603, NEW YORK, NY 10022
(Address of principle executive offices) (Zip Code)
(212) 223-0699
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports to be filed by section 13 or
15(d) of the Exchange Act during the past 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. (X) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
Securities under a plan confirmed by a court. ( ) Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUER
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 11,324,197 as of November 11, 1997.
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the three
months ended September 30, 1997 and 1996 and nine
months ended September 30, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders'
Equity for the nine months ended September 30, 1997 5
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of 10
Operations
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------------- --------------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 30,395 $ 276
Accounts receivable, net of allowance for doubtful accounts of
$261 and $50 10,955 3,135
Current portion of note receivable-related party 60 88
Costs and estimated earnings in excess of billings on uncompleted
contracts 3,192 2,177
Advances to vendors 4,041 -
Prepaid and other current assets 991 421
------------------- --------------------
Total current assets 49,634 6,097
Property and equipment, net 2,480 143
Goodwill ($17,375) and other intangibles ($1,192), net 18,567 6,050
Notes receivable-related party, less current portion 265 262
Deferred taxes 40 65
Other assets 730 133
------------------- --------------------
$ 71,716 $ 12,750
=================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loan payable - bank $ - $ 1,400
Current portion of notes payable and capital lease obligations 141 -
Accounts payable 3,389 1,175
Accrued and other liabilities 2,853 1,897
Billings in excess of costs and estimated earnings on uncompleted
contracts 104 201
Customer deposits 11,042 -
Income taxes payable 813 298
=================== ====================
Total current liabilities 18,342 4,971
------------------- --------------------
Notes payable and capital lease obligations, net of current portion 142 -
------------------- --------------------
18,484 4,971
------------------- --------------------
Stockholders' equity:
Preferred stock; 3,000,000 shares authorized, 200,000 shares of 6%
redeemable convertible, $25 stated value per share, issued and
outstanding 5,000 -
Common stock, $.01 par value, 20,000,000 shares authorized,
11,279,239 and 6,725,655 outstanding 123 72
Additional paid-in capital 46,550 8,186
Treasury stock - (715)
Foreign currency translation adjustment 7 -
Retained earnings 1,552 236
------------------- --------------------
Total stockholders' equity 53,232 7,779
------------------- --------------------
$ 71,716 $ 12,750
=================== ====================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 16,532 $ 8,240 $ 54,240 $ 17,657
-------------- --------------- -------------- ---------------
Cost of revenues 11,876 6,252 41,570 13,242
Selling, general and administrative expenses 3,348 862 9,608 2,278
-------------- --------------- -------------- ---------------
15,224 7,114 51,178 15,520
-------------- --------------- -------------- ---------------
Income from operations 1,308 1,126 3,062 2,137
-------------- --------------- -------------- ---------------
Other income (expense):
Interest expense (164) - (420) -
Interest income 148 - 289 -
-------------- --------------- ------------ -------------
(16) - (131) -
-------------- --------------- -------------- ---------------
Income before provision for taxes 1,292 1,126 2,931 2,137
Provision for income taxes 573 303 1,390 575
-------------- --------------- ------------ -------------
Income from continuing operations 719 823 1,541 1,562
Discontinued operations:
Income from discontinued operations, less
applicable taxes of $ 2 - 8 - 8
-------------- --------------- -------------- ---------------
Net income 719 831 1,541 1,570
Preferred dividends 75 - 225 -
============== =============== ============== ===============
Net income applicable to common shareholders $ 644 $ 831 $ 1,316 $ 1,570
============== =============== ============== ===============
Net income per share $ 0.07 $ 0.12 $ 0.14 $ 0.22
============== =============== ============== ===============
Weighted average number of common and common
equivalent shares outstanding 9,287 7,138 9,166 7,065
============== =============== ============== ===============
</TABLE>
<PAGE>
HOSPITALITY WOLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
TREASURY
PREFERRED STOCK COMMON STOCK STOCK
------------------------------------------------ FOREIGN
ADDT'L CURRENCY TOTAL
PAID IN TRANSLATION RETAINED STOCKHOLDERS'
SHARES VALUE SHARES VALUE VALUE CAPITAL ADJUSTMENT EARNINGS EQUITY
-----------------------------------------------------------------------------------------------
$ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 - - 6,726 72 (715) 8,186 - 236 7,779
Purchase of treasury stock - - (500) - (2,210) - - - (2,210)
Exercise of stock options
and warrants - - 353 3 - 823 - - 826
Stock issued in connection
with acquisition 200 5,000 1,250 13 - 6,941 - - 11,954
Stock issued in connection
with offering - - 3,450 35 2,925 29,291 - - 32,251
Foreign currency translation
adjustment - - - - - - 7 - 7
Stock options issued for services - - - - - 22 - - 22
Issuance of warrants to joint
venture partner - - - - - 1,287 - - 1,287
Net Income - - - - - - - 1,541 1,541
Preferred dividends - - - - - - - (225) (225)
----------------------------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1997 200 5,000 11,279 123 - 46,550 7 1,552 53,232
===============================================================================================
</TABLE>
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income applicable to common shareholders $ 1,316 $ 1,570
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 874 344
Provision for losses on accounts receivable (4) (101)
Stock options issued for consulting services 22 -
Deferred taxes 25 -
Changes in operating assets and liabilities,
exclusive of impacts of purchase acquisition:
Accounts receivable (1,688) (1,692)
Current assets of discontinued operations - 145
Costs and estimated earnings in excess of billings
on uncompleted contracts (1,015) (1,318)
Advances to vendors (3,486) -
Prepaid and other current assets (464) (30)
Accounts payable (2,406) 317
Accrued and other liabilities 441 979
Billings in excess of costs and estimated earnings
on uncompleted contracts (97) (330)
Customer deposits 7,765 -
Accrued loss on disposal of discontinued operations - (399)
Income taxes payable 515 438
(Increase) decrease in other assets (597) 17
-------------- -----------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 1,201 (60)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities - 715
Payments for acquisition, net of acquired cash 689 -
Purchase of property and equipment (1,379) (30)
-------------- -----------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (690) 685
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings of loan payable - bank (1,400) (456)
Purchase of treasury stock (2,210) (438)
Sale of treasury stock - 499
Proceeds from stock offering 32,251 -
Proceeds from issuance of stock options and warrants 826 -
(Payments) borrowings on notes payable and capital lease obligations 134
-------------- -----------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 29,601 (394)
-------------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 7 -
NET INCREASE (DECREASE) IN CASH 30,119 231
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 276 391
-------------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 30,395 $ 622
============== ===========
</TABLE>
See accompanying notes to consolidated financial statements
6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------------- -----------
Cash paid during the period for:
<S> <C> <C>
Income Taxes $ 507 $ 180
Interest 288 9
NON-CASH TRANSACTIONS
Issuance of stock for repayment of debt $ - $ 150
Repayment of debt from issuance of stock - (150)
Additional paid in capital for fair value of warrants issued to joint
venture partner $ 1,287 $ -
Fair value of warrants issued to joint venture partner (1,287) -
</TABLE>
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
NOTE 1: CONSOLIDATION
The consolidated financial statements of Hospitality Worldwide Services, Inc.
and Subsidiaries (the "Company") and related notes thereto as of September 30,
1997 and for the three and nine months ended September 30, 1997 are presented as
unaudited but in the opinion of management include all adjustments necessary to
present fairly the information set forth therein. These adjustments consist
solely of normal recurring accruals. The consolidated balance sheet information
for December 31, 1996 was derived from the audited financial statements included
in the Company's Form 10-KSB. These interim financial statements should be read
in conjunction with that report. The interim results are not necessarily
indicative of the results for any future period.
NOTE 2: ACQUISITIONS
On August 1, 1995, the Company acquired substantially all of the assets and
business, and assumed certain liabilities, of AGF Interior Services, Inc. (d/b/a
Hospitality Restoration and Builders) ("AGF"), through its newly formed
subsidiary corporation, Hospitality Restoration and Builders, Inc. ("HRB"). HRB
provides interior and exterior cosmetic renovation and maintenance for leading
hotel and hospitality customers nationwide. The acquisition was accounted for as
a purchase with the results of HRB included from the acquisition date.
On January 10, 1997, the Company completed the acquisition of The Leonard Parker
Company and affiliates ("LPC"), including its then subsidiary, Parker Reorder
Corporation ("Parker Reorder"). LPC, a purchasing company for the hospitality
industry, acts as an agent for the purchase of goods and services for its
customers which include major hotel and management companies worldwide. LPC
purchases furniture, fixtures and equipment, kitchen supplies, linens and
uniforms, guestroom amenities, and other supplies to meet its customers'
requirements for new hotel openings and major renovations. Parker Reorder
provides hotel properties with the ability to order, on an as needed basis,
operating supplies and equipment ("OS & E") used by such properties. The
products include china, silverware and guest amenities. The Company is currently
developing a new proprietary software product ("Parker FIRST"), which allows
clients to reorder OS & E and other products on-line and will provide such
clients with access to forecasting and product evaluation capabilities. The
acquisition was accounted for as a purchase method of accounting with the
results of LPC and Parker Reorder included in the consolidated financial
statements of the Company from the acquisition date.
NOTE 3: NET INCOME PER SHARE
Net income per share of common stock was computed by dividing the net income by
the weighted average number of common shares and common stock equivalents
outstanding during the period.
NOTE 4: PRO FORMA INFORMATION
The following pro forma consolidated financial information has been prepared to
reflect the acquisition of the assets and business of LPC. The pro forma
financial information is based on the historical financial statements of the
Company and LPC, and should be read in conjunction with the accompanying
footnotes. The accompanying pro forma financial information is presented as if
the transaction occurred January 1, 1996. The pro forma financial information is
unaudited and is not necessarily indicative of what the actual results of
operation of the Company would have been assuming the transaction had been
completed as of January 1, 1996, and neither is it necessarily indicative of the
results of operations for future periods.
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------------
(amounts in thousands, except share data) (unaudited)
Revenues $ 57,629
Net income applicable to common shares $ 1,654
Net income per share $ .20
The above unaudited pro forma statements have been adjusted to reflect the
amortization of goodwill, as generated by the acquisition, over a 30-year
period, adjustments to reflect LPC's officer's employment agreements entered
into at date of acquisition, dividends of 6% on $5,000,000 preferred shares,
additional income taxes on LPC's proforma income, and the issuance of 1,250,000
common shares in the transaction .
NOTE 5: RECENT DEVELOPMENTS
In May 1997, the Company exercised an option to purchase 500,000 shares of
common stock from its former President and Chief Executive Officer for
$2,210,000. The option was part of a reorganization plan adopted on February 26,
1996.
In May 1997, the Company entered into an Agreement to Joint Venture ("JV
Agreement") with Apollo Real Estate Advisors II, L.P. ("Apollo") and Watermark
Limited LLC ("Watermark LLC"), a major shareholder of the Company, to identify,
acquire, renovate, refurbish and sell hotel properties. The Company will perform
all of the renovation and procurement services for each of the properties
purchased by the joint venture. In addition, the Company will receive a five
percent equity interest in each of the entities formed to purchase such
properties in exchange for its contribution of five percent of the total equity
required to acquire, renovate and sell such properties. The joint venture
intends to own and operate the properties only for the time necessary to upgrade
and market them for resale. As an inducement to enter into the JV Agreement, the
Company issued to Apollo a seven year warrant to purchase 750,000 shares of
Common Stock at $8.115 per share. The warrant expires in 2004. The warrant is
currently exercisable as to 250,000 shares and becomes exercisable as to the
remaining 500,000 shares in increments of 100,000 shares for every $7,500,000 of
incremental revenue realized by the Company from the joint venture.
On September 23, 1997 the Company completed a public offering of 3,450,000
shares of common stock at $10.25 per share (the "Offering"). The net proceeds of
the Offering, after deducting applicable issuance costs and expenses were
$32,251,000. A portion of the proceeds was used to repay short-term indebtedness
with the remainder available for general corporate purposes, including the
financing of working capital needs and software development.
RECENT ACCOUNTING STANDARDS
In March 1997, The Financial Accounting Standards Board issued Statement of
Financial Standards No. 128 ("SFAS No. 128"), "Earnings Per Share." SFAS No. 128
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS No. 128 is effective for periods ending after December 15, 1997.
The adoption of this statement is not expected to have a material effect on the
consolidated financial statements.
NOTE 6: RELATED PARTY TRANSACTIONS
The Company performs renovation services for Watermark LLC, the Company's major
shareholder. During the second quarter of 1997, the Company renegotiated a
renovation contract with Watermark to provide for fees more consistent with a
project of similar scope and complexity. As a result of the revision, the
Company recognized additional revenue for the nine months ended September 30,
1997 of $409,000, and a job to date adjustment of $778,000, resulting in
additional gross margin of approximately $780,000 without an accompanying
increase in costs for the nine months ended September 30, 1997. As of September
30, 1997 the Company has no receivables from Watermark LLC.
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Hospitality Worldwide Services, Inc. (the "Company"), has evolved over the past
two years from a narrowly focused lighting fixture design, manufacturing and
installation company formerly known as Light Savers U.S.A., Inc., into one of
the leading providers of a broad range of outsourcing services to the
hospitality industry. These services include hotel renovation, procuring hotel
furniture, fixtures and equipment and reordering hotel operating supplies and
equipment. This rapid evolution resulted from two primary factors: (i) the
acquisition of the assets comprising the business of Hospitality Restoration and
Builders, Inc. ("HRB") and the acquisition of The Leonard Parker Company
("LPC"), including its then subsidiary, Parker Reorder Corporation ("Parker
Reorder") and (ii) the Company's disposition of its lighting business.
From its inception in 1991 to August 1995, the Company's only source of revenues
was its decorative energy-efficient lighting fixture design, manufacturing and
installation business. The Company acquired its renovation business in August
1995 and disposed of its lighting business in February 1996. As part of its
strategy to further its position as one of the leading providers of renovation
and procurement services for the hospitality industry on a global basis, the
Company acquired its procurement and reorder business in January 1997. As a
result of this significant change in the Company's business focus, period to
period historical comparisons are not considered meaningful.
Additionally, historical comparisons are not considered meaningful because
revenue recognition methodologies vary across the Company's businesses. The
Company recognizes all revenues associated with a renovation project on a
percentage of completion basis, as if the Company were a general contractor. As
part of this process, the Company develops a complete scope of work to be
performed and invoices its clients on a monthly or bi-monthly basis as work is
performed. The Company's cost of renovation services has been relatively stable
over the past two years. In contrast to the Company's recognition of renovation
revenues, the Company recognizes procurement revenues in two ways: (i) when the
Company acts as a purchaser and reseller of products, the Company recognizes all
revenues associated with the products it purchases at the time of shipment of
the product or (ii) when the Company acts as an agent only, service fee income
is recognized as revenue at the time the service is provided. In either case,
the Company charges its clients a procurement fee based upon the amount of time
and effort it expects to spend on a project. The Company intends to continue to
expand its role as a purchaser and reseller because the Company believes that it
can enter into more advantageous arrangements with its vendors when acting as
principal rather than agent. Under both methods of procurement revenue
recognition, profits primary include only procurement service fees. The Company
realizes reorder revenues based on the fees it charges its clients for services
rendered.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Revenues increased $36,583,000, or 207%, to $54,240,000 for the nine months
ended September 30, 1997, compared to $17,657,000, for the nine months ended
September 30, 1996, due in large part to the acquisition of LPC, which
contributed approximately $38,000,000 to such revenues.
Cost of revenues increased $28,328,000, or 214%, to $41,570,000 for the nine
months ended September 30, 1997, compared to $13,242,000 for the nine months
ended September 30, 1996. This increase resulted primarily from the acquisition
of LPC, which incurred costs of approximately $32,200,000 for the nine months
ended September 30, 1997. Cost of revenues as a percentage of revenues for the
nine months ended September 30, 1997 increased to 76.6%, compared to 75.0% for
the nine months ended September 30, 1996. The cost of renovation revenues for
the nine months ended September 30, 1997 decreased to 57.6%, compared to 75.0%
for the nine months ended
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
September 30, 1996. During the second quarter of 1997, the Company renegotiated
its renovation contract with Watermark LLC, a major shareholder of the Company,
to provide for fees more consistent with a project of similar scope and
complexity. The result was an adjustment to increase the Company's renovation
gross margin on the project by approximately $780,000 without an accompanying
increase in costs. Cost of procurement revenues as a percentage of procurement
revenues has decreased slightly.
Selling, general and administrative expenses for the nine months ended September
30, 1997 increased $7,330,000, or 322%, to $9,608,000, compared to $2,278,000,
for the nine months ended September 30, 1996. Contributing to this increase was
the acquisition of the procurement and reorder businesses, which incurred
expenses of $6,247,000. These expenses include significant development costs for
the Parker FIRST software. Additionally, selling, general and administrative
expenses include $ 685,000 and $ 313,000 of goodwill amortization for the nine
months ended September 30, 1997 and 1996, respectively. As a percentage of
revenues, selling, general and administrative expenses for the nine months ended
September 30, 1997 increased to 17.7% from 12.9% for the nine months ended
September 30, 1996.
Income from operations for the nine months ended September 30, 1997 increased to
$3,062,000, or 5.6% of revenues, compared to $2,137,000, or 12.1% of revenues,
for nine months ended September 30, 1996. The Company's procurement business
contributed ($270,000) to income from operations for the nine months ended
September 30, 1997. The Company's procurement business traditionally has a lower
operating margin than that of its renovation business as a significant portion
of its procurement revenues and costs include the resale of furniture and
fixtures at little or no markup. The Company's procurement income is the result
of procurement fees charged to its clients based upon the amount of time and
effort it expects to spend on projects.
The effective income tax rate for the nine months ended September 30, 1997 was
47.4%, compared to 26.9% for the same period last year. The increase in the
effective tax rate to 47.4% for the nine months ended September 30, 1997 is
primarily due to the nondeductibility of the amortization of goodwill on the LPC
acquisition, and the benefits of all net operating loss carryforwards previously
recognized.
As a result of the foregoing, net income applicable to common shareholders for
the nine months ended September 30, 1997 was $1,316,000, or $.14 per share,
compared to $1,570,000, or $.22 per share, for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term and long-term liquidity requirements generally consist
of operating capital for its procurement and renovation businesses and selling,
general and administrative expenses. Historically, the Company has satisfied its
short-long term liquidity requirements with cash generated from operations and
periodic utilization of its lines of credit. Due to the nature of the Company's
business, with a majority of its resources allocated to personnel for
performance of its services, capital requirements are insignificant. There are
substantial capital requirements necessary to beta test Parker FIRST as well as
anticipated additional costs necessary to sell and market the final product.
These future commitments, however, are at the discretion of the Company's
management. As a result, the Company can use its operating cash and cash and
cash equivalents for operating needs.
Net cash provided by operating activities was $1,201,000 for the nine months
ended September 30, 1997, compared to a use of $ 60,000 for the nine months
ended September 30, 1996. During the nine months ended September 30, 1997, the
Company's accounts receivable increased by $7,820,000, resulting from the growth
in revenue. This increase was partially offset by an increase in accounts
payable and accrued expenses of $3,170,000. Net cash used by investing
activities was $ 690,000 for the nine months ended September 30, 1997, compared
to net cash provided by investing
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
activities of $685,000 for the nine months ended September 30, 1996. The
positive cash flow for the nine months ended September 30, 1996 is the result of
the sale of marketable securities. The 1997 investing activities include an
investment in the development of the Parker FIRST software and leasehold
improvements for the Company's corporate offices.
In September 1997, the Company repaid all outstanding borrowings under its
secured line of credit with Marine Midland Bank of New York ("Bank"). The
Company is presently involved in discussions with the Bank to secure a
$7,000,000 unsecured line of credit.
In January 1997, the Company acquired 100% of the outstanding capital stock of
LPC. The purchase price for LPC of approximately $12.4 million consisted of
1,250,000 newly issued shares of Common Stock and 200,000 shares of 6%
redeemable convertible preferred, $25 stated value per share, which are
convertible, on a formula basis, into 1,000,000 shares of Common Stock (subject
to upward adjustment to a maximum of 5,000,000 shares in the event that the
market price of the Common Stock is below $5.00 at the time of conversion)
during the period from January 10, 1998 to January 10, 2000.
In May 1997, the company borrowed $2.2 million from Findim Investments S.A. at
an interest rate of 12% per annum, in order to exercise its option to purchase
500,000 shares of Common Stock from Tova Schwartz, the Company's former
President and Chief Executive Officer. This note was paid in full in September
1997.
Since January 1, 1996, the Company has issued 878,584 shares of Common Stock in
private placements and through the exercise of options and warrants, raising an
aggregate of 1,385,765. During such time, the Company repurchased an aggregate
of 1,500,000 shares of Common Stock from Tova Schwartz for an aggregate purchase
price of $3,175,000.
As the Company grows and continues to explore opportunities for strategic
alliances and acquisitions, investment in additional support systems, including
infrastructure and personnel, will be required. The Company expects to increase
its costs and expenses over the remainder of 1997 as it continues to invest in
the development of Parker FIRST. Although these increases may result in a
short-term reduction in operating margin as a percentage of revenues, the
Company anticipates that its investments, including the development of Parker
FIRST, will have a positive impact on its net revenues on a long-term basis. The
Company is anticipating commercial introduction of the Parker FIRST software by
the first quarter of 1998. The Company anticipates making substantial
expenditures as it continues to explore expansion though strategic alliances and
acquisitions. The Apollo Joint Venture has acquired the Warwick Hotel in
Philadelphia, Pennsylvania, has entered into a letter of intent to purchase a
hotel property in Richmond, Virginia and has identified four additional hotel
properties and is actively negotiating for the acquisitions thereof.
To support the Company's growth, as well as to support potential acquisitions of
hospitality-related businesses and the formation of strategic alliances, the
Company completed a public offering in September 1997. The net proceeds of the
offering, after deducting applicable issuance costs and expenses were
$32,251,000. A portion of the proceeds was used to repay short-term indebtedness
with the remainder available for general corporate purposes, including the
financing of working capital needs and software development. The Company
believes that its current cash, cash equivalents, together with the proceeds
from its public offering, will be sufficient to carry out its business strategy
for the next 18 months.
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Securityholders
On September 22, 1997, the Company held its Annual Meeting of
Shareholders (the "Meeting"), whereby the shareholders elected Directors and
approved a proposal to ratify the appointment of BDO Seidman, LLP as the
Company's independent auditors for the year ending December 31, 1997. The vote
on such matters was as follows:
1. Election of Directors:
NUMBER OF SHARES NUMBER OF SHARES
OF COMMON STOCK OF COMMON STOCK
WITHHELD
FOR AUTHORITY
Leonard F. Parker 5,281,706 0
Robert A. Berman 5,281,706 0
Douglas A. Parker 5,281,706 0
Louis K. Adler 5,281,706 0
George Asch 5,281,706 0
Richard A. Bartlett 5,281,706 0
Scott A. Kaniewski 5,281,706 0
2. Ratification of Appointment of Auditors: To ratify the appointment of
BDO Seidman, LLP as the independent auditors of the Company for the
year ending December 31, 1997.
FOR AGAINST ABSTAIN
4,901,340 183,166 197,200
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<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.
HOSPITALITY WORLDWIDE SERVICES, INC.
By: /S/ ROBERT A. BERMAN
----------------------------------------
Robert A. Berman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
By: /S/ HOWARD G. ANDERS
-----------------------------------------
HOWARD G. ANDERS
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER (PRINCIPAL FINANCIAL
OFFICER, PRINCIPAL ACCOUNT OFFICER) AND
SECRETARY
Dated: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE 9 MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 30,395
<SECURITIES> 0
<RECEIVABLES> 10,955
<ALLOWANCES> 261
<INVENTORY> 0
<CURRENT-ASSETS> 119,634
<PP&E> 2,480
<DEPRECIATION> 294
<TOTAL-ASSETS> 71,716
<CURRENT-LIABILITIES> 18,342
<BONDS> 0
5,000
0
<COMMON> 123
<OTHER-SE> 48,109
<TOTAL-LIABILITY-AND-EQUITY> 71,716
<SALES> 54,240
<TOTAL-REVENUES> 54,240
<CGS> 41,570
<TOTAL-COSTS> 51,178
<OTHER-EXPENSES> 420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420
<INCOME-PRETAX> 2,931
<INCOME-TAX> 1,390
<INCOME-CONTINUING> 1,541
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,316
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
