UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1999
/ / TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _____________
Commission File Number: 0-23054
HOSPITALITY WORLDWIDE SERVICES, 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 principal executive offices) (Zip Code)
(212) 223-0699
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant (1) has filed all reports 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.
/X/ Yes / / No
APPLICABLE ONLY TO CORPORATE ISSUER
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date: 13,349,668 as of May 13, 1999.
<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 March 31, 1999
and December 31, 1998.............................................3
Consolidated Statements of Operations for the three
months ended March 31, 1999 and 1998..............................4
Consolidated Statement of Changes in Stockholders'
Equity for the three months ended March 31, 1999..................5
Consolidated Statements of Cash Flows for the three
months ended March 31, 1999 and 1998 ...........................6-7
Notes to Consolidated Financial Statements ....................8-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations....................................................12-14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..............................15-16
Signatures...................................................................17
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER THE SECURITIES LITIGATION
REFORM ACT OF 1995.
Except for historical information contained herein, the Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which involve certain risks and uncertainties. The
Company's actual results or outcomes may differ materially from those
anticipated. In assessing forward-looking statements contained herein, readers
are urged to carefully read those statements. When used in the Report on Form
10-Q, the words "estimate," "anticipate," "expect," "believe" and similar
expressions are intended to identify forward-looking statements.
2
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
ASSETS
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
Unaudited
<S> <C> <C>
Cash and cash equivalents $ 12,259 $ 2,179
Marketable securities -- 8,500
Accounts receivable, less allowance for
doubtful accounts of $7,398 and $7,069
64,818 56,846
Costs and estimated earnings in
excess of billings
7,656 5,567
Advances to vendors 16,920 12,760
Deferred taxes 3,834 3,834
Prepaid and other current assets 1,466 4,737
--------- ---------
Total current assets 106,953 94,423
--------- ---------
Property and equipment, less accumulated
depreciation of $1,761 and $1,420
8,589 8,716
Goodwill and other intangibles, less
accumulated amortization of $2,766 and
$2,439
24,420 24,747
Deferred taxes 701 701
Other assets 5,379 4,787
--------- ---------
Total other assets 39,089 38,951
--------- ---------
$ 146,042 $ 133,374
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 614 $ 621
Accounts payable 32,291 32,075
Accrued and other liabilities 7,541 6,559
Billings in excess of costs and
estimated earnings
1,721 1,758
Customer deposits 26,282 19,864
Loans payable 15,835 10,925
Income taxes payable -- 176
--------- ---------
Total current liabilities 84,284 71,978
Long-term debt, net of current portion 2,800 2,965
--------- ---------
Total liabilities 87,084 74,943
--------- ---------
STOCKHOLDERS' EQUITY:
Convertible preferred stock,$.01 par
value, $25 stated value, 5,000,000
shares authorized, 120,000 issued
and outstanding, $3,000,000
liquidation preference 3,000 3,000
Common stock, $.01 par value,
50,000,000 shares authorized,
13,349,668 and 12,710,156 shares
issued and outstanding 133 127
Additional paid-in capital 56,469 56,448
Retained earnings (deficit) (644) (1,144)
--------- ---------
Total stockholders' equity 58,958 58,431
--------- ---------
$ 146,042 $ 133,374
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
<S> <C> <C>
Revenues $ 68,903 $ 41,290
Cost of revenues 62,174 34,816
-------- --------
Gross profit 6,729 6,474
Selling, general and administrative expenses 5,583 4,528
-------- --------
Income from operations 1,146 1,946
-------- --------
Other income (expense):
Interest income 251 364
Interest expense (424) (145)
-------- --------
(173) 219
-------- --------
Income from continuing operations before
provision for income taxes 973 2,165
Provision for income taxes 428 922
-------- --------
Income from continuing operations 545 1,243
-------- --------
Discontinued operations:
Loss from discontinued operations -- (25)
Loss on disposal of discontinued operations -- --
-------- --------
Loss from discontinued operations -- (25)
-------- --------
Net income $ 545 $ 1,218
======== ========
Basic earnings per common share:
Income from continuing operations $ 0.04 $ 0.10
-------- --------
Discontinued operation:
Loss from discontinued operations -- --
Loss on disposal -- --
-------- --------
Net income $ 0.04 $ 0.10
======== ========
Diluted earnings per common share:
Income from continuing operations $ 0.04 $ 0.09
-------- --------
Discontinued operation:
Loss from discontinued operations - -
Loss on disposal - -
Net income $ 0.04 $ 0.09
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,293 11,820
======== ========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 13,787 13,977
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------------------------------------
Number Number Addt'l Retained Total
of Stated of Par Paid In Earnings Stockholders'
Shares Value Shares Value Capital (Deficit) Equity
------ ----- ------ ----- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 120 $3,000 12,710 $127 $56,448 $(1,144) $58,431
Stock issued in
connection with
acquisition -- -- 640 6 21 -- 27
Net income -- -- -- -- -- 545 545
Preferred dividends -- -- -- -- -- (45) (45)
------------------------------------------------------------------- ------------------------------
Balance, March 31, 1999 120 $3,000 13,350 $133 $56,469 ($644) $58,958
==================================================================================================
</TABLE>
The accompanying to consolidated financial statements notes are an integral part
of these statements.
5
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months ended
March 31,
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITES:
<S> <C> <C>
Net income $545 $ 1,218
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 657 416
Stock based compensation charge 20 122
Deferred income tax benefit -- (350)
(Increase) decrease in current assets:
Accounts receivable,net (7,972) (6,513)
Costs in excess of billings (2,089) (4,370)
Advances to vendors (4,160) 452
Prepaid and other current assets (143) (448)
(Increase) in other assets (337) (236)
Increase (decrease) in current liabilities:
Accounts payable 215 2,661
Accrued and other liabilities 1,033 (13)
Billings in excess of costs (37) (148)
Customer deposits 6,367 (3,589)
Income taxes payable (176) 680
------- --------
NET CASH USED IN OPERATING ACTIVITIES (6,077) (10,118)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities 8,500 13,946
Purchase price of acquisition -- (1,500)
Investment in real estate ventures (282) (3,263)
Cash acquired, upon acquisition,
net of acquisition costs -- (62)
Purchase of property and equipment (214) (1,150)
Repayments on mortgages receivable 3,415 0
Notes receivable repayment -- 342
------ -----
NET CASH PROVIDED BY INVESTING ACTIVITIES 11,419 8,313
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loans payable -- (6,300)
Proceeds from borrowings on loans payable 4,910 6,300
Repayment of long term debt (172) (787)
Proceeds from exercise of stock options
and warrants -- 35
------- -----
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 4,738 (752)
------- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,080 (2,557)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,179 11,964
------- ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $12,259 $9,407
======= ======
</TABLE>
6
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Unaudited
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 108 $ 201
Interest $ 304 $ 52
NON-CASH INVESTING & FINANCING ACTIVITIES:
Net assets acquired (including goodwill) $ -- $6,232
Stock issued for assets acquired $ -- $6,172
Preferred stock dividends accrued $ 45 $ 75
The accompanying notes to consolidated financial statements are an integral part
of these statements.
7
<PAGE>
HOSPITALITY WORLDWIDE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(Unaudited)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: CONSOLIDATION
The consolidated financial statements of Hospitality Worldwide Services, Inc.
and Subsidiaries (the "Company") and related notes thereto as of March 31, 1999
and for the three months ended March 31, 1999 and 1998 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 adjustments. The consolidated balance sheet
information for December 31, 1998 was derived from the audited consolidated
financial statements included in the Company's Form 10-K. These interim
consolidated 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
In January 1998, the Company acquired Bekins Distribution Services, Inc.
("Bekins"), a provider of transportation, warehousing and installation services
to a variety of customers worldwide. Founded in 1969, Bekins is a logistical
services company that serves clients who are opening, renovating or relocating
facilities by assuring that materials, fixtures, furniture and merchandise are
moved from multiple vendor locations to their ultimate destinations in a
controlled orderly sequence so that each item can be installed on schedule. The
purchase price of Bekins, including acquisition costs, of approximately
$11,400,000 consisted of 514,117 shares of Common Stock and the assumption of
certain Bekins' debt. Additionally, under the terms of the purchase agreement,
the Company was required to issue an additional 639,512 shares of Common Stock
in January 1999 given the decrease in the price of the Company's common stock on
the one year anniversary date of the acquisition. The acquisition resulted in
goodwill of approximately $7,400,000 which is being amortized on a straight-line
basis over its estimated useful life of 30 years. The acquisition was accounted
for as a purchase with the results of Bekins included in the consolidated
financial statements of the Company from the acquisition date.
In February 1998, the Company, through HWS Real Estate Advisory Group, Inc.
purchased the assets of Watermark Investments Limited's ("Watermark") real
estate advisory business, consisting primarily of contracts to perform future
asset management and advisory services. Watermark is an international management
company that is the general partner of and manages Watertone Holdings LP, a
former shareholder of the Company. The purchase price was $1,500,000 of cash.
The acquisition resulted in goodwill of approximately $1,500,000 which is being
amortized on a straight-line basis over its estimated useful life of 15 years.
The acquisition has been accounted for as a purchase with their results included
in the consolidated financial statements of the Company from the acquisition
date.
8
<PAGE>
NOTE 3: COMPREHENSIVE INCOME
In 1998, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components in a separate
financial statement. Comprehensive income includes net income plus other
comprehensive income, which includes cumulative foreign translation adjustments
and unrealized gains and losses on marketable securities that are
available-for-sale. The differences between net income as reported and
comprehensive income is immaterial for the three months ended March 31, 1999 and
1998.
NOTE 4: OPERATING SEGMENTS
The Company's operating segments are based on the separate lines of business
acquired over the past several years which provide different services to the
hospitality industry, namely renovation, purchasing and logistics services.
Three Months Ended
March 31,
1999 1998
---- ----
Sales to Customers:
Renovation $13,844,000 $10,718,000
Purchasing 44,014,000 24,471,000
Logistics 10,998,000 5,231,000
General Corporate and Real Estate 47,000 870,000
----------- -----------
$68,903,000 $41,290,000
Intersegment Sales:
Renovation $ -- $ --
Purchasing 1,914,000 2,319,000
Logistics 1,414,000 516,000
General Corporate and Real Estate -- --
---------- -----------
$ 3,328,000 $ 2,835,000
Income (loss) from Operations:
Renovation $ 1,562,000 $ 1,415,000
Purchasing 61,000 279,000
Logistics 1,063,000 351,000
General Corporate and Real Estate (1,540,000) (99,000)
---------- -----------
$ 1,146,000 $ 1,946,000
Sales to customers include sales to related parties, namely the Apollo joint
venture and the ING joint venture.
The Company's revenue and assets predominately relate to the United States
operations, with immaterial amounts related to foreign operations.
For the three months ended March 31, 1999, no customers accounted for over 10%
of the Company's revenues. For the three months ended March 31, 1998, a major
lodging company accounted for approximately 15% of the Company's revenues.
9
<PAGE>
NOTE 5: EARNINGS PER SHARE
The following table reconciles the components of basic and diluted earnings per
common share for income from continuing operations for the three months ended
March 31, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
Numerator:
<S> <C> <C>
Income from continuing operations $545,000 $1,243,000
Preferred stock dividends (45,000) (75,000)
----------- -----------
Income available to common stockholders
from continuing operations - Basic 500,000 1,168,000
Effect of dilutive securities
Preferred stock dividends (a) -- 75,000
----------- -----------
Income available to common stockholders
from continuing operations - Diluted $ 500,000 $1,243,000
=========== ==========
Denominator:
Weighted average common shares outstanding -
Basic 13,293,000 11,820,000
Effect of dilutive securities
Stock-based compensation plans 437,000 1,157,000
Contingently issuable shares 57,000
Convertible preferred stock (a) -- 1,000,000
--------------------------------------
Weighted average common and
common equivalent shares outstanding -Diluted 13,787,000 13,977,000
Basic earnings per common share from continuing
operations $0.04 $0.10
Diluted earnings per common share from continuing
operations $0.04 $0.09
</TABLE>
(a) The common stock equivalent shares for the three months ended March 31, 1999
was 744,000 for the convertible preferred stock, which are not included in the
calculation of diluted earnings per common share because the effect would be
anti-dilutive.
NOTE 6: DISCONTINUED OPERATIONS
In December 1998, the Company decided to discontinue its hotel development
business. The company ceased the operations associated with such business in
April 1997, however the resolution date as to the recovery of costs incurred by
the Company and lost profits under the master development agreement with Prime
Hospitality Corporation is uncertain. The Company has restated the 1998 results
of operations to reflect its hotel development business as discontinued
operations.
10
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF BUSINESS/OVERVIEW
The Company believes that historical comparisons of profit levels and profit
percents may not be meaningful on a period to period basis because revenue
recognition methodologies vary across the Company's businesses. The Company
recognizes all revenues associated with a renovation or logistics project on a
percentage of completion basis. 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 recognizes as earnings that
portion of the total earnings anticipated from a contract which the cost of work
completed bears to the estimated total cost of the work covered by the contract.
In contrast to the Company's recognition of renovation and logistics revenues,
the Company recognizes procurement revenues in three ways: (i) under fixed fee
service contracts, the Company recognizes earnings under the percentage of
completion method. Under this method, the Company recognizes as earnings that
portion of the total earnings anticipated from a contract which the efforts
expended bears to the estimated efforts over the life of the contract. Earnings
for variable fee service contracts are generally recognized upon completion of
the associated service. (ii) as an agent, revenues include solely the service
fee income while the cost of the contract includes labor and other direct costs
associated with the contract and those indirect costs related to contract
performance. (iii) when the Company acts as a principal, functioning in a manner
similar to a purchaser and reseller of merchandise, revenues and costs of
contracts also include the cost of the merchandise purchased for the customer
which are recognized when the merchandise is shipped directly from the vendor to
the customer.
RESULTS OF OPERATIONS: THREE MONTHS ENDED MARCH 31, 1999 vs. THREE MONTHS ENDED
MARCH 31, 1998
The Company experienced a significant increase in its revenues to $68,903,000
for the three months ended March 31, 1999 in comparison to $41,290,000 for the
three months ended March 31, 1998, due in large part to increased revenues from
the renovation and procurement businesses which had continued growth in the
customer base and expansion of project scopes, as a result of increased sales
and marketing efforts, and the further establishment of the Company's name in
the hospitality industry.
Cost of revenues for the three months ended March 31, 1999 were $62,174,000,
compared to $34,860,000 for the same period last year. This increase is due
mainly to revenue growth. Gross profit, as a percent of revenue was 9.8% for the
three months ended March 31, 1999 as compared to 15.6% for the same period last
year. The decrease in gross profit, as a percent of revenue was due primarily to
additional costs associated with the renovation of the three joint venture
projects as well as a change in the sales mix in the purchasing businesses where
larger dollar volume contracts yielded additional revenues without corresponding
fee increases.
Selling, general and administrative expenses for the period ended March 31, 1999
have increased to $5,583,000, compared to $4,528,000 for the same period last
year. Contributing to this increase is the expansion of the administrative staff
to support the higher sales level. Additionally, selling, general and
administrative expenses include $327,000 and $262,000 of goodwill amortization
for the periods ended March 31, 1999 and 1998, respectively. As a percentage of
net revenues, selling, general and administrative expenses for the three months
ended March 31, 1999 have decreased to 8.1% from 11.0% for the same period last
year. This reduction is the result of operating efficiencies achieved by sales
growth.
11
<PAGE>
Interest income decreased from $364,000 to $251,000 based on a drop in
investable funds in the current quarter. Interest expense increased from
$145,000 in the first quarter of 1998 to $424,000 in the first quarter of 1999
due to increased borrowings under the Company's lines of credit for working
capital purposes.
The provision for income taxes in the current quarter was $428,000 based on an
effective tax rate of 44.0%. For the quarter ended March 31, 1998 the provision
for income taxes was $922,000 at an effective tax rate of 42.6%. The higher tax
provision in 1998 was due to the higher level of pre-tax income.
As a result of the above, income from continuing operations for the three-month
period ended March 31, 1999 was $545,000 compared to income from continuing
operations of $1,243,000 for the same period last year.
12
<PAGE>
HOSPITALITY WORLDWIDE SERVICES INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term and long-term liquidity requirements generally consist
of operating capital for its businesses and selling, general and administrative
expenses. The Company continues to satisfy its short-term and long-term
liquidity requirements with cash generated from operations, bank lines of credit
and funds from a public offering of its Common Stock in September 1997.
Net cash used in operating activities was $6,077,000 for the three months ended
March 31, 1999, compared to net cash used of $10,118,000 for the same period
last year. During the three months ended March 31, 1999, the Company's accounts
receivable and vendor deposits increased $12,132,000. This increase was
partially offset by an increase in accounts payable, accruals and customer
deposits of $7,616,000. The additional accounts receivable at March 31, 1999 are
expected to be collected in full in 1999.
Net cash provided by investing activities for the three months ended March 31,
1999 was $11,419,000 compared to 8,313,000 for the three months ended March 31,
1998. The increase in cash provided is primarily the result of maturing
marketable securities and the collection of a mortgage receivable.
Net cash provided by financing activities for the three months ended March 31,
1999 was $4,738,000 compared to net cash used in financing activities of
$752,000 for the same period last year. The primary financing source in the
three months ended March 31, 1999 was the proceeds from borrowings under the
Company's lines of credit.
The Company currently has available unsecured lines of credit with Marine
Midland Bank and NationsBank which provide maximum borrowings of $10,000,000 and
$6,000,000 respectively. Borrowings under the lines of credit bear interest at
each bank's prime lending rate. Proceeds from the borrowings are utilized to
fund short-term cash requirements. At March 31, 1998, there was a total of
$15,835,000 in outstanding borrowings under the lines of credit.
The Company believes its present cash position, including anticipated increasing
revenues, cash on hand, availability under bank lines of credit and its ability
to obtain additional financing as necessary, will allow the Company to meet its
anticipated capital commitments and its short-term operating needs for at least
the next twelve months.
INFLATION
Inflation and changing prices during the current year did not significantly
affect the major markets in which the Company conducts its business. In view of
the moderate rate of inflation, its impact on the company's business has not
been significant.
YEAR 2000
The year 2000 issue results from computer programs and circuitry that do not
differentiate between the year 1900 and the year 2000 because they were written
using two- rather than four-digit dates to define the applicable year. If not
corrected, many computer applications and date-sensitive devices could fail or
create erroneous results before, on or after January 1, 2000. The Year 2000
issue affects virtually all companies and organizations, including the Company.
13
<PAGE>
The Company has developed, and is implementing a plan, the goal of which is to
assure that the Company will achieve Year 2000 readiness in time to avoid
significant Year 2000 failures. The company is proceeding with its assessment of
the Year 2000 readiness issues for its computer systems, business processes,
facilities and equipment to assure their continued functionality. The company is
continuing its assessment of the readiness of external entities, including
subcontractors, suppliers, vendors, and customers that interface with the
Company. To that end, the Company has taken the following actions:
o Computer Systems. The Company periodically upgrades its computer systems
as its needs require. The Company began the process of replacing or
upgrading the software for its internal computer systems in 1998, and
expects to complete this process, including the replacement of its
financial and project management systems by the fourth quarter of 1999.
Vendors of the new internal computer systems certified them to be Year
2000 compliant. The Company's computer hardware is limited to stand-alone
and networked desk-top systems. The Company has assessed the Year 2000
readiness of its computer hardware and potential risks to operations, and
intends to replace those systems that may pose a risk to operations in
1999. Parker FIRST, the company's new proprietary software product, has
been developed and maintained by Parker Reorder. Parker FIRST software was
designed to account for the Year 2000 and beyond. This software product
was in use by hotel companies beginning in 1998.
o Business Processes. The Company has and continues to assess the potential
impact of Year 2000 on its business processes. Management for each
division is assessing the risks of Year 2000 issues as it specifically
relates to such businesses and the division's readiness. The company is in
the process of contacting its key vendors, suppliers and subcontractors
regarding their Year 2000 readiness.
The costs incurred for replacing or upgrading the Company's computer systems are
being funded with cash flows from operations and available financing. The costs
incurred principally relate to new systems being implemented to improve business
functionality rather than solely to address Year 2000 issues. These costs
associated with the computer systems replacements and implementation are
anticipated to be approximately $2.0 to $3.0 million.
The Company believes that its internal computer systems, facilities, and
equipment will be Year 2000 compliant. However there is no assurance that all of
the planned upgrades will be completed in time or function as intended. As the
Company has no contingency plan other than to deal as expeditiously as possible
with situations if and when they arise, the Company may experience significant
disruptions, the costs of which the Company is unable to estimate at this time.
The Company also believes that disruptions in some of its vendors' or
subcontractors' operations will not significantly affect its projects because
the Company has relationships with other vendors and subcontractors with similar
expertise. The company cannot assume, however, that an adequate supply of
vendors or subcontractors will be available.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of earnings per share (Incorporated herein by
reference to Note 5 to the Company's Consolidated
Financial Statements).
27 Financial Data Schedule
(b) Reports on Form 8-K
None
16
<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
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
By: /S/HOWARD G. ANDERS
------------------------------------
HOWARD G. ANDERS
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL OFFICER,
PRINCIPAL ACCOUNTING OFFICER) AND
SECRETARY
Dated: May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, NOTES, THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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0
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