U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
(MarkOne)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2000
[ ] 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 0-22132
BUCKHEAD AMERICA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 58-2023732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7000 Central Parkway, Suite 850, Atlanta, GA 30328
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 393-2662
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Act:
Common stock, par value $.01
(Title of class)
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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. The aggregate market value is computed
by reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to the
date of filing. As of February 28, 2001: $3,842,434.
For purposes of this response, all executive officers, directors, and
holders of greater than 10% of the outstanding common shares of the registrant
as of the specified date are considered to be affiliates.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. As of February 28,
2001:
Common Stock, par value $.01 - 2,015,885 shares outstanding
-----------------------------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Information contained in registrant's definitive proxy statement relating
to the 2001 Annual Meeting of Stockholders is incorporated by reference in
response to Items 10 through 13 of Part III.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General Development of Business
- -------------------------------
Form and Year of Organization. Buckhead America Corporation ("Buckhead" or
the "Company") and most of its wholly-owned subsidiaries were incorporated in
Delaware on December 17, 1992. Other subsidiaries were subsequently created or
purchased, generally for the purpose of acquiring assets. Unless the context
otherwise requires, references to the Company herein include the Company and its
subsidiaries.
Material Purchases and Sales of Significant Assets. Prior to 1997, the
Company purchased and sold various assets; primarily hotels, mortgage notes
secured by hotels, hotel franchising rights, and other hospitality related
assets. As of December 31, 1996, the Company owned seven hotels, primarily
limited service, four of which were managed by the Company, including a 150-room
hotel in Orlando, Florida (the "Orlando Hotel") owned by a partnership in which
the Company held a 55% interest. The Company also owned the rights to franchise
and license Country Hearth Inns, a modernized bed and breakfast hotel concept.
As of December 31, 1996, nineteen Country Hearth Inns were open, six of which
were Company owned.
In May 1997, the Company completed its acquisition of The Lodge Keeper
Group, Inc. of Prospect, Ohio ("Lodge Keeper"). Lodge Keeper operated 18 hotels
under long-term leases, held management contracts on six Country Hearth Inn
hotels and owned a 186-room independent extended-stay hotel. Simultaneously,
Lodge Keeper assumed the management responsibilities of the four hotels
owned by the Company.
In September 1997, the Company completed its acquisition of Hatfield Inns,
LLC. ("Hatfield"). The acquisition included eight 40-room hotel properties
located in Kentucky and Missouri. All eight properties were converted to operate
as Country Hearth Inns and are managed by Lodge Keeper. The acquisition also
included the plans and design rights which the Company has used for the
development and construction of additional properties.
In December 1997, the Company entered into long-term leases with Host
Funding, Inc. ("Host") on two of the already managed Country Hearth Inn hotels.
In May 1998, the Company acquired a 121-room hotel in Norcross, Georgia
(the "Norcross Hotel"). The hotel is managed by Lodge Keeper and was operated as
a Best Western - Bradbury Suite until December 1999 at which time it was
converted to a Country Hearth Inn.
In June 1998, the Company entered into leases for seven additional hotel
properties owned by Host. The hotel properties are operated under Super 8 (4)
and Sleep Inn (3) license agreements and are managed by Lodge Keeper.
During 1998, the Company sold eight leasehold interests in hotel properties
which had been acquired with the Lodge Keeper acquisition. During 1999, the
Company sold four more leasehold interests in hotel properties which had been
acquired with the Lodge Keeper acquisition.
In June 1999, the Company sold the Orlando Hotel to Orange County, Florida
to make way for the planned expansion of the Orange County Convention Center.
The Company continued to operate the property under a lease agreement which
expired in January 2001.
During 1998 - 2000, the Company constructed and opened five additional
Company owned 40-room hotels and entered into leases on four other 40-room
hotels which were opened in 1999 and 2000.
During 2000, the Company sold three hotels and purchased three hotels. Also
during 2000, the Company changed most of the key personnel involved in its hotel
management segment (Lodge Keeper), and moved its hotel management operations to
its corporate office in Atlanta, Georgia. The hotel accounting function remains
in Prospect, Ohio.
2
From 1994 through 2000, the Company expanded its Country Hearth Inn
franchising operations by developing updated prototype hotels, implementing a
franchise sales and marketing plan, and establishing a centralized room
reservation system. The Company is licensed to sell Country Hearth Inn hotel
franchises in 50 states. As of December 31, 2000, 58 Country Hearth Inns were
open and operating in 12 states, 29 of which were Company owned or leased.
In addition to the Company owned and leased properties described above,
Lodge Keeper manages 22 other hotel properties which operate under various brand
names, including seven Country Hearth Inns.
Financial Information About Segments
- ------------------------------------
The information required by this caption is included in the Company's
consolidated financial statements which are included pursuant to Item 8 of this
Form 10-K and incorporated herein by reference.
Description of Business
- -----------------------
Principal Products and Services. The Company operates in the hospitality
industry and its principal holdings include hotels, leasehold interests in
hotels, loans and other investments secured by hotels, franchising rights, hotel
management contracts and other related assets. Its principal product is the
Country Hearth Inn mid-priced hotel chain which the Company acquired in May
1994. The primary activities of the Company involve the expansion of the Country
Hearth Inn chain, limited-service hotel management, and
development/acquisition/sale of hotel properties. Expansion of the Country
Hearth Inn chain has been effected through direct acquisition and conversion of
existing hotels, new construction, and through franchise sales. Additionally,
the Company manages 60 hotels, 38 of which are Company owned or leased. For
certain further information about the Company's hotels, see "ITEM 2. DESCRIPTION
OF PROPERTY."
Segments. The Company conducts recurring operations in three segments of
the limited-service hotel industry - hotel franchising, hotel management, and
hotel operations. The company generates additional revenues and results of
operations from hotel development activities.
Hotel franchising involves the selling and servicing of rights and licenses
comprising the Country Hearth Inn lodging system. Revenues include initial fees
and continuing royalty, marketing and reservation fees from Company owned and
leased hotels and from unaffiliated customers. Continuing fees are based on each
franchised hotel's room revenues.
Hotel management involves the oversight of day-to-day hotel operations and
accounting for limited-service and some full-service hotels. Revenues include
continuing fees from Company owned and leased hotels and from unaffiliated
customers. Continuing fees are based on each managed hotel's revenues.
Hotel operations involves the operations of Company owned and leased
hotels. Revenues are generated from unaffiliated hotel guests. Hotel operations
also includes the Company's share (equity method) of unconsolidated entities
which also operate hotels and the minority interests share of consolidated
partnerships' results which are included in hotel operations.
Hotel development involves the development and construction or purchase of
existing hotel properties and subsequent sale thereof along with related
activities such as servicing notes receivable generated from sales. Corporate
activities are generally administrative and also include all interest income and
expense which does not specifically relate to other segment operations.
Franchise and management fees are charged to Company owned and leased
hotels at the same rates as charged to unaffiliated customers.
Brands. The Company's owned and leased properties as of December 31, 2000
operate under the brand names of Country Hearth Inn (29), Super 8 (4), Sleep Inn
(2), Travelodge (1), and unbranded (2). Additionally, the Company, through Lodge
Keeper, manages other hotels which operate under other brand names, including
Holiday Inn, Ramada Inn, Suburban Lodge, Villager, Best Western, and others.
3
Competition. There is significant competition in every phase of the
hospitality industry including development, construction, management, and
franchising. There are many hotel management companies in the United States, and
many of them are significantly larger than the Company. The continued growth of
the Company's hotel management operations is partially dependent upon the
Company's development and franchising operations as well as the ability to
identify and successfully negotiate third party contracts.
As a franchisor, the Company competes with a large number of hotel
franchise companies, most of whom are much larger than the Company and own
brands which are more nationally recognized than the Company's. The Company is
somewhat disadvantaged by the larger companies' reservation systems and national
marketing efforts.
As a hotel operator, the Company's owned and leased properties compete with
other hotels in each local market in which they are located. The Company
competes directly with these other hotels for hotel guests. The Company's rates
and occupancies are directly impacted by activities of these other hotels and by
additions to the supply of competing rooms in each local market.
The Company is a relatively new entrant in the hotel industry. It believes
that its management is experienced in hotel development, hotel franchising, and
hotel management. In addition, the Company may identify other opportunities in
the hospitality industry. However, existing hotel companies and new entrants to
the hotel industry in markets which the Company may pursue will present
significant competition which may have an adverse effect on the Company.
Regulation. Sales of franchises are principally regulated through fairly
uniform state laws. Such laws generally provide for registration by the
franchisor of standardized offering documents and compliance with numerous
financial qualifications. The Company undertook substantial registration
activities and is presently licensed to sell Country Hearth Inn franchises in 50
states.
Seasonality. Due to the typical travel trends of hotel guests in most of
the geographic areas in which the Company operates, limited service hotel
operations tend to be highly seasonal. Historically, results in the second and
third calendar quarters are stronger than in the first and fourth quarters. This
seasonality impacts all three of the Company's operating segments since the
revenues of all three segments are dependent on hotel guest revenue.
Research and Development. During 2000,1999, and 1998 the Company invested
approximately $38,000, $28,000, and $42,000, respectively, in market studies,
environmental studies, and other feasibility analyses relating to potential
hotel acquisitions and development.
Environmental Compliance. The Company's operations and maintenance policies
and procedures at each owned, leased, or managed property include policies and
procedures regarding environmental compliance. The costs of such compliance is
not significant.
Employees. As of February 28, 2001, the Company had 777 employees in the
aggregate, including 6 full-time corporate employees, 6 full-time and 2
part-time hotel franchising employees, 30 full-time and 2 part-time hotel
management employees, and 312 full-time and 419 part-time hotel operations
employees.
Financial Information About Geographic Areas
- --------------------------------------------
All of the Company's operations are conducted in the United States.
4
Risk Factors
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This Form 10-K contains forward looking statements that involve risks and
uncertainties. Statements contained in this Form 10-K that are not historical
facts are forward looking statements that are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. The Company's actual
results may differ significantly from the results indicated by such forward
looking statements.
The Company is subject to a number of risks, including the general risks of
investing in real estate, the illiquidity of real estate, environmental risks,
possible uninsured or underinsured losses, fluctuations in property taxes, hotel
operating risks, the impact of competition, the difficulty of managing growth,
seasonality, the risks inherent in operating a hotel franchise business, and the
risks involved in hotel renovation and construction. For a discussion of these
and other risk factors, see the ARISK FACTOR" section contained in the Company's
Registration Statement on Form S-3 (File No. 333-37691).
ITEM 2. DESCRIPTION OF PROPERTY.
Corporate Offices
- -----------------
The Company's corporate headquarters are located at 7000 Central Parkway,
Suite 850, Atlanta, Georgia. The Company leases approximately 4,900 square feet
as its corporate headquarters. The lease term extends through December 2002 at
an annual rate of approximately $96,600. Franchising and hotel management
operations are also conducted at this location. The Company believes its
headquarters are adequate for its current needs.
Hotel accounting functions and some marketing functions are conducted by
Lodge Keeper which operates in leased office space located in Prospect, Ohio.
The Lodge Keeper leased space includes approximately 16,800 square feet and
extends through November 2006 at an annual rate of approximately $60,000. The
Company believes that these offices are adequate for its current needs and
provide room for moderate expansion.
5
Owned and Leased Real Properties
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Land. As of February 28, 2001, the Company owned five parcels of
undeveloped and unencumbered land, with an aggregate book value of $304,817. All
of such parcels are held for sale.
Owned and Leased Hotel Properties. The following table sets forth certain
2000 information for each of the Company's owned and leased hotels:
Revenue
Average Average per
No. of Year Year Occupancy Daily Available Total
Properties Rooms Built Acquired Rate(a) Rate(a) Room (a) Revenue(b)
---------- ----- ----- -------- ------- ------- -------- ----------
Country Hearth Inn
Dalton, GA 90 1970 1996 37.1% $29.55 $10.96 $ 372,183
Country Hearth Inn
Norcross, GA 121 1985 1998 47.1% $37.53 $17.67 $ 805,494
Country Hearth Inn
Atlanta, GA 82 1971 1996 51.9% $58.99 $30.62 $ 989,130
Country Hearth Inn
Mason, OH 93 1997 1999 40.3% $69.11 $27.85 $1,012,137
Country Hearth Inns and 1987-
Suites (2) in MI and OH 82 1988 2000 56.2% $63.97 $35.95 $ 393,662
KY, MO, OH, GA
Owned Rural Gold Country 1993- 1995-
Hearth Inns (15) in 6 States 599 2000 2000 53.0% $49.22 $26.09 $5,326,222
St. Louis, MO
Leased Rural Gold Country 1998- 1998-
Hearth Inns (3) in GA 120 2000 2000 63.3% $44.63 $28.25 $ 880,878
Host Leased Properties 1977- 1997-
(8) in 6 States 542 1995 1998 50.8% $48.94 $24.86 $5,307,636
Other Leased Properties 1970-
(4) in OH 301 1973 1997 47.0% $49.02 $23.04 $2,257,429
Northwest Inn 1964-
St. Louis, MO 186 1968 1997 94.0% $21.89 $20.58 $1,438,208
Other (c) $4,934,241
- -------------------------------------------------------------------------------------------------------------------------
Total $23,717,220
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(a) Statistical information represents full year of operation.
(b) Total revenue represents revenues earned during ownership period.
(c) Represents revenues earned in 2000 from properties prior to their sale or
lease expiration.
6
Dalton, GA Country Hearth Inn. This 90-room hotel was acquired in August
1996. Renovation and refurbishment of the property was completed in February
1997 and the hotel presently operates as a Country Hearth Inn. The hotel secures
two mortgage notes with a combined December 31, 2000 balance of $1,208,512. This
property is held for sale and the Company has received a letter of intent from a
potential purchaser. No assurance can be given that such anticipated sale will
close.
Norcross, GA Country Hearth Inn. This 121-room hotel was acquired in 1998
and was converted to operate as a Country Hearth Inn in 1999. The hotel secures
a mortgage note with a December 31, 2000 balance of $3,661,405. This property is
held for sale and is presently listed with a broker.
Atlanta, GA Country Hearth Inn. The Company acquired this 82-room hotel in
March 1996. During the latter half of 1996, the hotel was renovated and
refurbished for conversion to operate as a Country Hearth Inn which it presently
continues to operate as. This hotel secures a first mortgage loan with a
December 31, 2000 balance of $1,986,753.
Mason, OH Country Hearth Inn. This 93-room Country Hearth Inn was
constructed in 1996 and 1997 and opened in June 1997. The Company's investment
in the partnership which owns the hotel increased from 27.5% to 44.5% in May
1997 in connection with the Lodge Keeper acquisition. The property is subject to
a first mortgage loan with a December 31, 2000 balance of $2,445,592. The
partnership also has notes payable to certain partners including $221,395 to the
Company and $248,759 to a minority partner as of December 31, 2000.
Country Hearth Inns and Suites (2) . In August 2000, the Company acquired a
40-unit all suites property in Grand Rapids, Michigan and a 42-unit all suites
property in Dublin, Ohio. Both properties were immediately converted to operate
under the Country Hearth Inn franchise system. The Dublin property is owned by a
limited partnership in which the Company holds an approximate 70% interest and
the hotel secures a mortgage note with a December 31, 2000 balance of
$1,396,739. The Grand Rapids property is owned by an LLC in which the Company
holds a 20% interest and the hotel secures a mortgage note with a December 31,
2000 balance of $1,398,053. The Company leases (triple-net basis) the property
from the LLC for net rent of approximately $200,000 per year.
Owned Rural Gold Country Hearth Inns (15). In September 1997, the Company
acquired eight 40-room hotel properties located primarily in smaller communities
of Kentucky (5) and Missouri (3). All eight were converted to and presently
operate as Country Hearth Inns. From 1998 through 2000 the Company constructed
five additional properties of similar design in Kentucky (2), Ohio (2), and
Indiana (1). In 2000, the Company purchased another similarly constructed hotel
in Georgia which it had previously operated under a lease agreement. Generally,
these 14 properties are interior corridor 40-room facilities located in smaller
communities and enjoy limited competition. They secure first and second mortgage
notes payable with December 31, 2000 balances aggregating $12,885,844. As of
December 31, 2000, ten of these properties were held for sale. Two of the
properties were sold in February 2001 and the other eight remain held for sale.
Another 40-room rural property in Texas which the Company had acquired in
1995 was sold in March 2001.
Leased Rural Gold Country Hearth Inns. The Company also operates three
40-room properties in Georgia under long term triple-net lease agreements. Each
lease has an initial term of 15 years and options for up to an additional 15
years. Each lease requires annual base rent of $150,000 and provides for
additional percentage rent based on hotels revenues over certain levels.
Host Leased Properties. During 1997 and 1998, the Company, in two separate
transactions, entered into long term lease agreements for four Super 8 Motels,
three Sleep Inns, and two Country Hearth Inns owned by Host Funding, Inc.
("Host"). One of the Country Hearth Inn leases was terminated in 1999 when the
property was sold by Host. The leased properties are located in Florida (2),
Mississippi, Missouri (2), Illinois, Kentucky, and Indiana. Lease terms are for
fifteen (15) years with two extension options of five years each, and provide
for contingent payments based on a percentage of revenues. Base rents for the
eight properties aggregates $2,246,841 per year. Host is responsible for
property taxes and capital expenditures.
7
Other Leased Properties. In addition to the leased Rural Gold Country
Hearth Inns and Host leased properties described above, the Company leases four
other limited-service hotels all of which are located in Ohio. Three properties
operate as Country Hearth Inns and one as a Travelodge. Lease terms range from
10 to 30 years with options to renew at varying terms. Certain of the leases
provide for contingent payments based upon a percentage of revenues. Base
rentals on the four properties aggregates $268,747 per year. Three of these
leasehold interests are presently being marketed for sale.
St. Louis Northwest Inn. The Company acquired the 186-room Northwest Inn in
St. Louis, Missouri, as part of the May 1997 Lodge Keeper acquisition. The
property is an extended-stay facility which is positioned to compete with
existing low priced extended-stay properties in the area. The property secures a
first mortgage loan with a December 31, 2000 balance of $1,669,453.
Renovation and environmental programs are continuously ongoing at all
Company owned and leased hotels and management believes adequate funds are
available for these purposes. In the opinion of management, the properties are
adequately covered by insurance and are suitable and adequate for their present
use.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party in any pending legal proceedings other than
routine litigation that is incidental to its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
- ------------------
The Company's Common Stock trades on The Nasdaq SmallCap Market under the
symbol: BUCK. Prior to February 27, 2001, the Common Stock was traded on The
Nasdaq National Market.
The following table presents the high and low sales prices for the Common
Stock for each quarter of 1999 and 2000.
($ Per Share)
----------------
High Low
---- ----
Quarter ended March 31, 1999 6.12 4.25
Quarter ended June 30, 1999 6.50 4.75
Quarter ended September 30, 1999 6.12 5.50
Quarter ended December 31, 1999 6.00 5.37
Quarter ended March 31, 2000 5.94 5.12
Quarter ended June 30, 2000 5.56 4.00
Quarter ended September 30, 2000 5.37 4.12
Quarter ended December 31, 2000 5.50 3.62
The sales price amounts have been supplied by The Nasdaq Stock Market and
do not include retail mark-up, mark-down, or commission and may not represent
actual transactions.
Holders
- -------
As of February 28, 2001, the Company estimates that there were
approximately 800 beneficial holders of its Common Stock, including individual
participants in security position listings.
Dividends
- ---------
On September 23, 1997, the Company issued 30,000 unregistered shares of
$100 par value ten percent (10%) nonvoting cumulative Series A Preferred Stock
as partial consideration for the acquisition of Hatfield Inns, LLC. Pursuant to
a settlement agreement finalized in 2000, certain dividends in arrears were
forgiven and the Company agreed to exchange all of the outstanding shares of
Series A Preferred Stock for an equal number of unregistered shares of $100 par
value Series B Preferred Stock. The exchange was completed in the first quarter
of 2001. The Series B Preferred Stock is nonvoting and accrues cumulative
dividends at the rate of 9.25%. The Series B Preferred Stock has certain rights,
privileges and preferences that limit and qualify the rights of the Common
Shareholders of the Company. Holders of the Series B Preferred Stock are
entitled to receive, prior and in preference to any distribution to the holders
of Common Stock, cumulative dividends at the rate of 9.25% per annum, to the
extent declared by the Board of Directors. All accrued but unpaid dividends of
the Series B Preferred Stock must be paid in full before any cash dividend may
be declared on the Common Stock. Further, holders of the Series B Preferred
Stock have certain preferential distribution rights in the event of any
liquidation, dissolution or winding-up of the Company. During 2000 and 1999, the
Board of Directors declared dividends of $231,250 and $163,750 respectively, on
the Preferred Stock. As of December 31, 2000, there was $46,250 of cumulative
preferred dividends in arrears.
Certain of the Company's debt obligations contain provisions relating to
minimum net worth and debt to equity ratios. In the opinion of management, such
restrictions are not likely to limit the ability to pay dividends in the future.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered
- --------------------------------------------------------------------------------
Securities
- ----------
(1) During 2000, the Company issued 19,226 shares of Common Stock to
Quality Lodging, LLC as partial consideration for the acquisition of hotel
management contracts. The Common Stock issued was valued at a total of $96,130.
(2) During 2000, the Company agreed to issue 30,000 shares of Series B
Preferred Stock in exchange for all of the outstanding shares of Series A
Preferred Stock. See "Dividends" above.
Exemption from the registration provisions of the Securities Act of 1933,
as amended (the "Securities Act") for the transaction described in (2) above was
claimed on the basis that such transaction did not constitute an "offer," an
"offer to sell," or a "sale" under Section 5 of the Securities Act. Exemption
from registration under the Securities Act is also claimed for both transactions
under Sections 4(2) and 4(6) of the Securities Act and the rules and regulations
promulgated thereunder.
9
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data of Buckhead America Corporation
for and as of the end of each of the years indicated in the five-year period
ended December 31, 2000 have been derived from the audited consolidated
financial statements of Buckhead America Corporation and subsidiaries, which
consolidated financial statements have been audited by KPMG LLP. The selected
consolidated financial data should be read in conjunction with the consolidated
financial statements of Buckhead America Corporation and subsidiaries, including
the notes to those consolidated financial statements, which are included
elsewhere herein and in the registrant's previously filed Form 10-KSB's for
1999, 1998, 1997, and 1996.
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Hotel revenues $23,717,220 25,886,594 25,720,086 15,590,744 9,979,477
Total revenues 26,697,296 32,672,127 29,169,143 18,569,549 13,872,805
Income (loss) before income taxes (5,413,793) 2,723,957 334,495 243,612 1,816,844
Income tax expense (benefit) 2,859,328 1,055,000 (901,000) (2,930,000) -
Net income (loss) (8,273,121) 1,668,957 1,235,495 3,173,612 1,816,844
Diluted income (loss)
per common share (4.23) 0.61 0.47 1.56 1.00
Total assets 53,364,472 58,714,701 59,541,118 52,164,023 27,035,095
Notes payable 35,156,721 32,779,342 34,608,429 28,582,108 12,418,959
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Financial Condition and Changes in Financial Condition
For an understanding of the significant factors that influenced the
Company's performance during the past three years, the following discussion
should be read in conjunction with the consolidated financial statements and the
notes to consolidated financial statements included under Item 8 of this Form
10-K for the years ended December 31, 2000, 1999, and 1998, which are
incorporated herein by reference.
The Company has continued its expansion of the Country Hearth Inn lodging
system. The net number of Country Hearth Inns open increased by eight in 1998,
by 12 in 1999, and by nine in 2000 bringing the total number of properties open
to 58. An additional 31 properties are in various stages of development; most of
which are expected to open within the next 12 to 18 months. Included in these
numbers are 27 "Rural Gold" properties open at the end of 2000, an increase of
11 during 1999 and an increase of nine during 2000. The "Rural Gold" properties
are the interior corridor 40-room properties designed for smaller communities
which have historically been overlooked by the lodging industry.
The Company also has continued expansion of its hotel management business
through its wholly-owned subsidiary, The Lodge Keeper Group, Inc. ("Lodge
Keeper"). In addition to managing 38 Company owned or leased properties, Lodge
Keeper manages 22 other properties for third parties which operate under
numerous national brand names, including seven Country Hearth Inns. Total
properties managed increased to 60 as of the end of 2000, an increase of 13
during 1999 and an increase of seven during 2000.
During 2000, the Company sold a 40-room hotel in Texas, a 50-room hotel in
Ohio, and a 180-room hotel in Florida. Net proceeds from these sales aggregated
approximately $1.1 million in cash plus a $550,000 note receivable. Also, notes
payable of approximately $3.5 million were paid-off or assumed by purchasers.
The Company remains contingently liable on one mortgage note payable assumed by
a purchaser and guaranteed by the Company. Such note has an approximate balance
of $2.2 million as of December 31, 2000.
In August 2000, the Company acquired a 40-unit all suites property in Grand
Rapids, Michigan and a 42-unit all suites property in Dublin, Ohio. Both
properties were immediately converted to operate under the Country Hearth Inn
franchise system. The Dublin property is owned by a limited partnership in which
the Company holds an approximate 70% interest and the hotel secures a mortgage
note with a December 31, 2000 balance of approximately $1.4 million. The Grand
Rapids property is owned by an LLC in which the Company holds a 20% interest and
the hotel secures a mortgage note with a December 31, 2000 balance of
approximately $1.4 million. The Company leases (triple-net basis) the property
from the LLC for net rent of approximately $200,000 per year.
In June 2000, the Company purchased a 40-room "Rural Gold" property in
Georgia which it had previously operated under a lease agreement. The Company
assumed a mortgage note payable of approximately $1.0 million in connection
therewith.
Capital expenditures during 2000, aggregated approximately $3.4 million and
mostly related to the Company's two newly constructed "Rural Gold" Country
Hearth Inns in Madison, Indiana and Urbana, Ohio. Approximately $2.3 million of
such expenditures was funded by construction loan commitments and the remainder
was funded by working capital and the Company's line of credit.
In June 1999, the Company completed the sale of the Country Hearth Inn
located in Orlando, Florida for $13.5 million. The Company held an approximate
59% interest in the partnership which owned the hotel in addition to holding
franchise and hotel management contracts relating to the operation of the
property. After retirement of an approximate $4.4 million first mortgage loan,
payment of certain fees, costs, bonuses, and minority interest shares, the
Company's share of net proceeds was approximately $5.5 million. After
distributions to minority interest partners of approximately $3.2 million, the
Company began soliciting for additional partnership units and the Company has
purchased an additional 14% of the partnership. The Company continued to operate
the property under an agreement with Orange County, Florida (the purchaser)
until January 2001 at which time the property was demolished to make way for
expansion of the Orange County Convention Center.
11
In August 1999, the Company purchased nine hotel management agreements from
the members of Quality Lodging, LLC ("Quality") for an aggregate purchase price
of approximately $900,000, including the issuance of 65,378 unregistered shares
of the Company's common stock. The Company also agreed to purchase additional
contracts from Quality when the related hotel properties were completed and
opened. During 2000, the Company purchased an additional three contracts for an
aggregate purchase price of approximately $230,000, including 19,226
unregistered shares of the Company's common stock.
The Company sold its leasehold interests in four hotel properties during
1999 resulting in aggregate gains of approximately $500,000. These sales
represented a continuation of the Company's previously announced desire to
divest itself of older properties.
In July 1999, the Company completed the sale of one of its three 40-room
hotel properties in Texas. A second of these properties was sold in January 2000
and the third property was sold in March 2001. Operating profit contribution
from these hotels has not been significant. Management estimated an aggregate
loss on sale of these three properties to be approximately $300,000. Such loss
was recognized in the second quarter of 1999 by the recording of a provision for
impairment.
The Company holds a 44.5% interest in a partnership which owns a 93-room
Country Hearth Inn in Mason, Ohio. Due to an increase in effective control, the
Company consolidated the partnership in its 1999 and 2000 financial statements.
As a result of the consolidation, the Company's property and equipment increased
by approximately $4 million and notes payable by approximately $3 million.
During 1999, the Company loaned the partnership approximately $240,000 which,
along with $268,000 from another partner, was used to reduce the first mortgage
obligation on the hotel.
Capital expenditures during 1999 aggregated approximately $3 million and
mostly related to two new Company owned "Rural Gold" Country Hearth Inns in
Eddyville, Kentucky and Washington Courthouse, Ohio. Approximately $1.5 million
of such expenditures was funded by construction loan commitments and the
remainder was funded by working capital and the Company's line of credit.
During the first half of 1999, the Company drew down $1 million on its bank
line of credit in order to fund working capital needs and construction
commitments. Also, the Company temporarily suspended payment of dividends on its
Series A preferred stock. As has been previously disclosed, the Company's hotel
operations are highly seasonal. Historically, the Company's hotel revenues and
operating profits have been stronger during the second and third quarters as
opposed to the first and fourth quarters. Management expects this trend to
continue. The line of credit was fully repaid in July from a portion of the
proceeds from the Orlando hotel sale. The Company also resumed payment of Series
A preferred dividends.
The Company continued to acquire interests in hotel properties during 1998.
The most significant transaction was the purchase of leasehold interests in
seven hotel properties owned by Host Funding, Inc. ("Host"). The properties
operated as Sleep Inn (3) and Super 8 (4) hotels. The leasehold interests were
purchased in June 1998 for an aggregate purchase price of approximately $1.3
million, including approximately $500,000 in cash, $400,000 of Company common
stock, and $400,000 of notes payable. The Company committed to expend
approximately $400,000 for renovations and other improvements to the properties
for which it would receive dollar for dollar credits against its notes payable
to Host. Such expenditures were completed during 1999. The Company had
previously leased two Country Hearth Inns owned by Host; such transactions
having been completed in October 1997. During 1999, one of the Country Hearth
Inn properties was sold and the lease terminated.
The Company also acquired a 121-room hotel in Norcross, Georgia which was
operated as a Best Western-Bradbury Suite. The acquisition was completed in May
1998 for an aggregate purchase price of approximately $4 million, including cash
of approximately $200,000 and an assumed mortgage note payable of approximately
$3.8 million. During 1999, the property was converted to a Country Hearth Inn
and marketed for sale. The hotel continues to be held for sale.
12
In September 1998, the Company acquired a 50-room hotel property in
Coshocton, Ohio for approximately $725,000. The property was operated under a
Travelodge license agreement. The Company had previously held a leasehold
interest in the property. The purchase price was partially financed by a
$600,000 mortgage note which was later paid off with the proceeds from a new
$700,000 mortgage note. The Coshocton property was sold in 2000.
The Company completed construction of a 40-room hotel in Nicholasville,
Kentucky which opened in September 1998 and began construction on the 40-room
property in Eddyville, Kentucky which opened in March 1999. Construction of both
of these properties was partially financed by construction loans ($1 million
each) from a local bank and by purchase money notes to the land sellers for an
aggregate of $225,000.
During 1998, the Company completed significant renovations on three leased
hotels in Ohio which were converted to operate as Country Hearth Inns. Also,
eight 40-room hotel properties which had been acquired in 1997 were converted to
operate as Country Hearth Inns. These were the original "Rural Gold" properties.
In the aggregate, the Company spent approximately $6 million on capital
expenditures during 1998 in addition to approximately $900,000 on the Host lease
acquisition and renovation expenditures. Proceeds from notes payable of
approximately $3 million during 1998 partially financed these expenditures. The
remaining proceeds from the Company's December 1997 sale of $5 million of
convertible debentures provided the additional funds needed.
Another source of funds during 1998 was the sale of certain leasehold
interests. The Company had previously announced its intention to divest its
investments in older less profitable hotel properties. During 1998, the Company
sold eight of its leasehold interests in hotel properties which resulted in
gains of approximately $1.6 million. The operating profit contribution from
these properties was not significant.
The Company's balance sheet at December 31, 1999 included a deferred tax
asset of $2,788,000. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income by
the Company during the periods in which those temporary differences become
deductible. Management considers the projected future taxable income and tax
planning strategies in determining whether a valuation allowance is necessary.
As a result of significant operating losses incurred in the fourth quarter of
2000 and the necessity to recognize significant asset impairment provisions (see
below), management elected to establish a valuation allowance for the full
amount of the Company's deferred tax assets. This resulted in the recognition in
the fourth quarter of 2000 of a net income tax charge of approximately $2.9
million.
Liquidity and Capital Resources
The Company experienced quite significant revenue declines in 2000 versus
1999 and 1998 (see "Results of Operations" below). Excluding revenues from hotel
sales, the most significant portion of these declines occurred in the fourth
quarter. Total revenues in the fourth quarter of 2000 were approximately $1.9
million (or 27%) less than in the same period in 1999.
As a result of these declines, management increased the number of hotel
properties being marketed for sale. In 1999, the Company had placed five hotel
properties for sale. During 2000, the Company placed an additional 19 properties
for sale. As previously discussed, several of these hotel sales were completed
in 1999 and 2000 and as of December 31, 2000, the Company had 17 owned or leased
properties classified as held for sale. Four of these properties were sold
during the first quarter of 2001 and two others are presently under contract for
sale. Management expects net proceeds from 2001 property sales to aggregate $3
million to $5 million.
13
The Company has $1,090,000 outstanding on its bank line of credit which
must be repaid on or prior to July 31, 2001. Additionally, the Company's current
portion of notes payable at December 31, 2000 included mortgage notes which
mature in 2001 secured by three hotel properties. One of these properties was
sold in 2001 and another is presently under contract for sale. Management
expects to sell the third property prior to its note maturity or to negotiate an
extension of the note's due date. Management further expects that proceeds from
these and other property sales and from positive operating cash flows generated
during spring and summer months will be sufficient to satisfy the line of credit
obligation.
The Company has suspended payment of preferred stock dividends and has
negotiated deferrals of certain note payable obligations. Also, the Company has
terminated all but $180,000 of future development commitments. Management
believes that these actions coupled with the proceeds from hotel sales and
changes made in its hotel management operations (see below) will provide
adequate liquidity for the Company's operations for at least the next eighteen
months.
Results of Operations
The Company conducts recurring operations in three segments of the
limited-service hotel industry - hotel franchising, hotel management, and hotel
operations. The Company generates additional revenues and results of operations
from hotel development activities.
Hotel franchising involves the selling and servicing of rights and licenses
comprising the Country Hearth Inn lodging system. Revenues include initial fees
and continuing royalty, marketing and reservation fees from Company owned and
leased hotels and from unaffiliated customers. Continuing fees are based on each
franchised hotel's room revenues.
Hotel management involves the oversight of day-to-day hotel operations and
accounting for limited-service and some full-service hotels. Revenues include
continuing fees from Company owned and leased hotels and from unaffiliated
customers. Continuing fees are based on each managed hotel's revenues.
Hotel operations involves the operations of Company owned and leased
hotels. Revenues are generated from unaffiliated hotel guests. Hotel operations
also includes the Company's share (equity method) of unconsolidated partnerships
which also operate hotels and the minority interests' share of consolidated
entities' results which are included in hotel operations.
Hotel development involves the development and construction or purchase of
existing hotel properties and subsequent sale thereof along with related
activities such as servicing notes receivable generated from sales. Corporate
activities are generally administrative and also include all interest income and
expense which does not specifically relate to other segment operations.
Franchise and management fees are charged to Company owned and leased
hotels at the same rates as charged to unaffiliated customers and are eliminated
in consolidation.
Hotel Franchising Segment
Hotel franchising revenues and income before taxes amounted to $1,784,142
and $424,763, respectively, in 2000, $2,141,373 and $901,020, respectively, in
1999, and $1,320,327 and $14,046, respectively, in 1998. The 1999 results
include termination fees of $640,895 from the Orlando hotel sale transaction.
The remaining increases in revenues and profits are attributable to the
previously discussed increases in the number of Country Hearth Inns opened in
1998, 1999, and 2000. Revenues also include fees from Company owned or leased
hotels of $911,572 in 2000, $809,624 in 1999, and $621,119 in 1998. Management's
continued goal is the expansion of the Country Hearth Inn chain due to the
higher profit margins on incremental franchise revenues as compared to the other
operating segments.
14
Hotel Management Segment
Hotel management revenues and income(loss) before taxes amounted to
$1,975,169 and $(606,148), respectively, in 2000, $2,324,275 and $451,908,
respectively, in 1999, and $1,193,417 and $(593,398), respectively, in 1998. The
1999 results include termination fees of $604,220 from the Orlando hotel sale
transaction. The remaining increases in revenues are attributable to the
previously discussed increases in the number of properties managed. Revenues
also include fees from Company owned or leased hotels of $933,336 in 2000,
$992,252 in 1999, and $968,963 in 1998. The largest increase in recurring,
non-eliminating revenues in 1999 occurred in the hotel management segment. This
was attributable to a significant increase in the number of hotels managed for
unaffiliated third parties. Excluding the effect of the Orlando termination
fees, third party management fees increased over $300,000 in 2000 versus 1999.
Unfortunately, hotel management operating expenses increased by more than
$500,000. The incremental costs (mostly payroll) of servicing the additional
third party management contracts exceeded the incremental revenues.
In the fourth quarter of 2000, the Company changed most of the key
personnel involved in its hotel management segment and moved its hotel
management operations to its corporate office in Atlanta, Georgia. The hotel
accounting function remains in Prospect, Ohio. Management is hopeful that this
change will result in more efficient hotel management operations and that the
performance of both third party owned hotels and Company owned and leased
properties will be improved.
Hotel Operations Segment
Hotel revenues amounted to $23,717,220 in 2000, $25,886,594 in 1999, and
$25,720,086 in 1998. Hotel earnings before interest, taxes, depreciation,
amortization, and rent ("EBITDAR") declined from $7,200,019 in 1998 to
$7,115,743 in 1999 and to $4,931,736 in 2000. As previously discussed, the
Company had purchased and sold numerous properties during 1998 and 1999. The
1999 changes specified above are mostly attributable to those transactions. The
2000 declines are mostly attributable to certain specific hotels as identified
below.
Revenues from the Company's Orlando Florida hotel decreased $303,000 in
2000 primarily as a result of its impending destruction in January 2001. The
Company recognized $193,000 less revenues in 2000 from its Daytona, Florida
hotel due to its sale in September 2000. The Company recognized $508,000 less
revenues in 2000 from its 40-unit Texas properties primarily as a result of the
sale of one of these properties in early 2000; the third, and final, of these
Texas properties was sold in 2001. The Company's hotels in Norcross and Dalton,
Georgia experienced revenue declines of $635,000 in 2000; both of these
properties are included in the portfolio of held for sale properties. Other
decreases resulting from 1999 and 2000 property sales are offset by 1999 and
2000 property additions from construction and acquisitions. Also, the Company
recognized a loss of $568,000 in its hotel operations segment relating to a
joint venture investment which sold a hotel in 2000; that investment will no
longer impact the Company's operations.
Revenues, EBITDAR, and income before taxes from the Company's owned and
leased "Rural Gold" properties increased in 2000 primarily as a result of
property additions. Revenue per available room (REVPAR) at these hotels which
were open for all of 1999 and 2000 increased slightly in the aggregate. Overall
REVPAR declined slightly as a result of the newly opened properties still being
in their ramp up stages. Management continues to believe in the "Rural Gold"
concept and intends to commit additional resources, when available, to its
growth.
Management viewed hotel operations as a less profitable, but necessary,
segment to support development and franchising activities. Growth of the Country
Hearth Inn brand has been partially effected through development activities
which result in hotel ownership. Until hotel properties are eventually sold, the
operations of the hotels impact the results of the Company. Margins on hotel
revenues are not considered to be as potentially profitable as the fee based
segments (franchising and management). However, in order to grow the fee based
segments, the Company has had to invest in hotel operations assets. Note that
owned and leased hotel operations contributed $1,844,908 in 2000, $1,801,876 in
1999, and $1,590,082 in 1998, to the fee based segments. Management no longer
believes that development activities which result in hotel or leasehold
ownership will be necessary to enhance the growth of the fee based segments.
Partially as a source for capital and partially as a change in strategy, the
Company is presently offering many of its hotel properties for sale and does not
plan to make additional development investments other than those presently
committed.
15
Other Non Segment Related Items
Other non-segment related expenses in 2000 such as non-mortgage related
interest expense and corporate expenses were comparable to 1999 and 1998 and in
line with management expectations. Development related revenues in 1999
primarily consisted of gains on property sales of $3,214,110. These gains
resulted from the Orlando hotel sale and the sale of leasehold interests
previously discussed. 1998 results included gains of $1,648,894 from the
leasehold sales. Investment income increased from $201,334 in 1998 to $495,531
in 1999 primarily as a result of the notes receivable generated from the
leasehold sales. Investment income in 2000 decreased as a result of paydowns on
such note balances. The 2000 year end note receivable balance increased as a
result of the Daytona hotel sale.
Other income in 2000, 1999 and 1998 amounted to $14,237, $38,591, and
$675,167, respectively. The 1998 amount includes a $510,000 nonrecurring item.
Changes in interest expense and depreciation expense are directly related
to changes in owned hotel properties. All Company owned hotels are encumbered by
mortgage obligations, most of which are fixed rate. The Company uses consistent
straight-line depreciation methods for all owned hotels which results in
depreciation expense recognition consistent with hotel ownership changes. An
exception to this is that depreciation expense is not recognized on properties
held for sale. Due to the significant number of properties which were classified
as held for sale at the end of 2000, depreciation expense is expected to be much
less in 2001.
Property and leasehold interests held for sale are stated at the lower of
cost or fair value less costs to sell. Fair value of property and leasehold
interests held for sale has been estimated by Management based upon current
market information. At the date on which a decision is made to dispose of a
property or leasehold interest, any amount by which the carrying amount of an
asset exceeds the fair value less cost to sell is reported as a provision for
impairment. During 2000 and 1999, the Company recorded provisions for impairment
of $2,050,000 and $373,529, respectively, relating to its properties held for
sale. The Company recorded an additional $250,000 provision for impairment in
2000 relating to two Host leases because the lender has initiated foreclosure
activities against Host on two of the properties.
In 1998, the Company recognized an income tax benefit of $901,000 resulting
primarily from a decrease in the valuation allowance for deferred tax assets.
The Company recognized income tax expense in 1999 of $1,055,000 which was
approximately equal to 39% of pretax income. The Company recognized income tax
expense of $2,859,328 in 2000 as a result of the previously discussed increase
in the deferred tax valuation allowance.
Risk Factors
This report contains forward looking statements that involve risks and
uncertainties. Statements contained in this report that are not historical facts
are forward looking statements that are subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995. The Company's actual
results may differ significantly from the results indicated by such forward
looking statements.
The Company is subject to a number of risks, including the general risks of
investing in real estate, the illiquidity of real estate, environmental risks,
possible uninsured or underinsured losses, fluctuations in property taxes, hotel
operating risks, the impact of competition, the difficulty of managing growth,
seasonality, the risks inherent in operating a hotel franchise business, the
risks involved in hotel renovation and construction, and the uncertainty of
obtaining additional financing or extensions of existing credit facilities as
needed. For a discussion of these and other risk factors, see the "RISK FACTOR"
section contained in the Company's Registration Statement on Form S-3 (File No.
333-37691).
16
Effect of New Accounting Pronouncements
On December 3, 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements. " The Staff's expressed intent in this bulletin was not to change
current guidance, but rather to clarify existing guidance summarizing certain of
the SEC staff's reviews in applying accounting principles generally accepted in
the United States of America to revenue recognition circumstances. SAB No. 101
reiterated four criteria for revenue recognition: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred or services are rendered, (3) the
seller's price to purchase is fixed and determinable, and (4) collectibility is
reasonably assured.
The Company implemented SAB No. 101, as required, in the fourth quarter of
the fiscal year ended December 31, 2000. The revenue recognition criteria in SAB
No. 101 were consistent with the Company's existing revenue recognition policies
and, as a result, the implementation of SAB No. 101 did not have a material
effect on the Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Certain Hedging Activities. " In June 2000, the FASB issued SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activity, an Amendment of SFAS 133. " SFAS No. 133 and SFAS No. 138 require that
all derivative instruments be recorded on the balance sheet at their respective
fair values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000; the Company adopted SFAS No.
133 and SFAS No. 138 on January 1, 2001. The Company does not expect the
adoption of SFAS No. 133 and SFAS No. 138 to have a material effect on the
Company's financial statements as the Company had no derivative instruments as
of December 31, 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As of December 31, 2000, the Company's obligations included variable rate
mortgage notes and a line of credit bank note with aggregate principal balances
of $3,716,907 which mature at various dates through 2015. The Company is exposed
to the market risk of significant increases in future interest rates. Each
incremental point in the prime interest rate would increase the Company's
interest expense by approximately $37,000 per year. This risk is somewhat
mitigated in that inflationary increases in interest rates would theoretically
result in increases in average hotel room rates. Also, significant increases in
interest rates would have a dampening effect on additions of competitive hotels
in the Company's markets.
At December 31, 2000, the Company's unrestricted investment securities
included equity securities valued at $63,454. The Company is exposed to the risk
that such securities will become worthless. The Company's restricted investment
securities also include equity securities. Such restricted securities comprise
the assets of the Company's deferred compensation plan and changes in the value
of such securities have no net impact on the Company's earnings.
The ultimate collection of the Company's notes receivable is subject to
various credit risks. Net notes receivable at December 31, 2000 amounted to
$4,527,215 and consisted of 34 notes, most of which were collateralized by or
related to various hotel assets. Also, certain of these notes relate to
leasehold interests in hotel properties for which the Company remains
contingently liable for future rent payments. The collection of such notes
receivable and the potential financial exposure for contingent rents is
determinant on the ability of other hotel operators to satisfy these
obligations. Their ability to satisfy such obligations is subject to many risks,
including economic conditions affecting the hotel industry, their ability to
effectively manage their hotel assets, new competition, and other factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED FINANCIAL STATEMENTS WITH INDEPENDENT AUDITORS' REPORT THEREON
Buckhead America Corporation's consolidated financial statements with
independent auditors' report thereon are included on the pages which follow.
17
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2000 and 1999
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Board of Directors
Buckhead America Corporation:
We have audited the accompanying consolidated balance sheets of Buckhead America
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income (loss), shareholders' equity and comprehensive
income (loss), and cash flows for each of the years in the three-year period
ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Buckhead America
Corporation and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000 in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
Atlanta, Georgia
March 23, 2001
18
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2000 and 1999
ASSETS 2000 1999
---------------- ---------------
Current assets:
Cash and cash equivalents, including restricted cash of $382,646
in 2000 and $486,160 in 1999 (note 3) $ 1,345,671 2,390,856
Investment securities, including restricted securities of $182,067
in 2000 and $215,849 in 1999 (note 4) 202,750 1,312,256
Accounts receivable, net 1,436,030 1,857,002
Current portions of notes receivable, net (note 5) 832,055 517,870
Property and leasehold interests held for sale, net (note 6) 21,273,517 8,114,083
Other current assets 202,911 666,439
---------------- ---------------
Total current assets 25,292,934 14,858,506
Investment securities (note 4) 42,771 139,977
Noncurrent portions of notes receivable, net (note 5) 3,695,160 3,482,633
Property and equipment, at cost, net (notes 6, 8, and 9) 20,967,076 31,979,242
Deferred costs, net (note 7) 2,535,461 2,513,249
Leasehold interests, net (note 7) 670,530 2,526,599
Deferred tax assets, net (note 12) -- 2,788,000
Other assets (note 7) 160,540 426,495
---------------- ---------------
$ 53,364,472 58,714,701
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,310,588 1,088,582
Accrued expenses 2,109,689 1,545,602
Current portions of notes payable (note 8) 18,803,712 8,681,568
---------------- ---------------
Total current liabilities 22,223,989 11,315,752
Noncurrent portions of notes payable (note 8) 16,353,009 24,097,774
Other liabilities (note 4) 269,330 396,266
---------------- ---------------
Total liabilities 38,846,328 35,809,792
---------------- ---------------
Minority interests 764,068 450,290
Shareholders' equity (notes 10 and 13):
Series A preferred stock; par value $100; 200,000 shares
authorized; 30,000 shares issued and outstanding in 1999 -- 3,000,000
Series B preferred stock; par value $100; 200,000 shares
authorized; 30,000 shares issued and outstanding in 2000 3,000,000 --
Common stock; $.01 par value; 5,000,000 shares
authorized; 2,113,881 and 2,094,655 shares issued
and 2,025,023 and 2,029,313 shares outstanding in
2000 and 1999, respectively 21,139 20,947
Additional paid-in capital 7,897,530 7,854,921
Retained earnings 3,729,683 12,234,054
Accumulated other comprehensive loss (245,229) (148,023)
Treasury stock, 88,858 and 65,342 common shares
in 2000 and 1999, respectively (649,047) (507,280)
---------------- ---------------
Total shareholders' equity 13,754,076 22,454,619
Commitments and contingency (notes 7, 9, and 15)
---------------- ---------------
$ 53,364,472 58,714,701
================ ===============
See accompanying notes to consolidated financial statements.
19
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Income (Loss)
Years ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------------- --------------- ---------------
Revenues:
Hotel revenues $ 23,717,220 25,886,594 25,720,086
Management fee income (note 6) 1,041,833 1,332,023 224,454
Franchise fee income (note 6) 872,570 1,331,749 699,208
Gains on property sales, net (notes 6 and 7) 608,717 3,587,639 1,648,894
Investment income (note 4) 442,719 495,531 201,334
Other income, net (note 11) 14,237 38,591 675,167
-------------- -------------- --------------
Total revenues 26,697,296 32,672,127 29,169,143
-------------- -------------- --------------
Expenses:
Hotel operations 17,454,398 18,141,606 18,010,415
Management operations 1,472,358 823,644 767,347
Franchise operations 840,239 808,909 946,834
Other operating and administrative (note 14) 1,847,550 1,702,913 1,569,793
Leasehold rent 2,601,020 2,858,378 2,660,488
Depreciation and amortization 1,783,271 1,808,843 1,773,346
Provisions for impairment (note 6) 2,300,000 373,529 --
Interest 2,999,599 3,299,283 2,981,945
Equity in joint venture losses (note 7) 812,654 131,065 124,480
-------------- -------------- --------------
Total expenses 32,111,089 29,948,170 28,834,648
-------------- -------------- --------------
Income (loss) before income taxes (5,413,793) 2,723,957 334,495
Provision for income tax expense (benefit) - (note 12) 2,859,328 1,055,000 (901,000)
--------------- -------------- --------------
Net income (loss) $ (8,273,121) 1,668,957 1,235,495
=============== ============== ==============
Net income (loss) per common share (note 10):
Basic $ (4.23) 0.69 0.48
=============== ============== ==============
Diluted $ (4.23) 0.61 0.47
=============== ============== ==============
See accompanying notes to consolidated financial statements.
20
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
Years ended December 31, 2000, 1999, and 1998
Accumulated
Series A Series B Additional other Total
Comprehensive Common preferred preferred paid-in Retained comprehensive Treasury shareholders'
income (loss) stock stock stock capital earnings loss stock equity
------------- -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Balances at December
31, 1997 $ 19,496 3,000,000 -- 6,963,024 9,793,352 -- (422,321) 19,353,551
Issuance of 53,647
common shares for
asset acquisition 537 -- -- 399,463 -- -- -- 400,000
Acquisition of 7,492
common shares -- -- -- -- -- -- (48,698) (48,698)
Preferred stock
dividends paid -- -- -- -- (300,000) -- -- (300,000)
Comprehensive income:
Net income $ 1,235,495 -- -- -- -- 1,235,495 -- -- 1,235,495
Unrealized loss on
investment securities $ (148,023) -- -- -- -- -- (148,023) -- (148,023)
------------- -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Total comprehensive
income $ 1,087,472
============= -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Balances at December
31, 1998 20,033 3,000,000 -- 7,362,487 10,728,847 (148,023) (471,019) 20,492,325
Issuance of 65,378
common shares for
asset acquisition 654 -- -- 391,614 -- -- -- 392,268
Issuance of 26,000
common shares pur-
suant to exercise of
options 260 -- -- 100,820 -- -- -- 101,080
Acquisition of 6,000
common shares -- -- -- -- -- -- (36,261) (36,261)
Preferred stock divi-
dends paid -- -- -- -- (163,750) -- -- (163,750)
Comprehensive income:
Net income $ 1,668,957 -- -- -- -- 1,668,957 -- -- 1,668,957
Change in unrealized
loss on investment
securities -- -- -- -- -- -- -- --
------------- -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Total comprehensive
income $ 1,668,957
============= -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Balances at December
31, 1999 20,947 3,000,000 -- 7,854,921 12,234,054 (148,023) (507,280) 22,454,619
Issuance of 19,226
common shares for
asset acquisition 192 -- -- 95,938 -- -- -- 96,130
Acquisition of 23,516
common shares -- -- -- -- -- (141,767) (141,767)
Preferred stock divi-
dends paid -- -- -- -- (231,250) -- -- (231,250)
Exchange of Series A
preferred stock for
Series B preferred
stock --(3,000,000) 3,000,000 (53,329) -- -- -- (53,329)
Comprehensive loss:
Net loss $ (8,273,121) -- -- -- -- (8,273,121) -- -- (8,273,121)
Change in unrealized
loss on investment
securities (97,206) -- -- -- -- -- (97,206) -- (97,206)
------------- -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Total comprehensive
loss $ (8,370,327)
============= -------- --------- ---------- ------------ ---------- ------------ ----------- --------------
Balances at December
31, 2000 $ 21,139 -- 3,000,000 7,897,530 3,729,683 (245,229) (649,047) 13,754,076
======== ========= ========== ============ ========== ============ =========== ==============
See accompanying notes to consolidated financial statements.
21
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999, and 1998
2000 1999 1998
-------------- -------------- --------------
Cash flows from operating activities:
Net income (loss) $ (8,273,121) 1,668,957 1,235,495
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,783,271 1,808,843 1,773,346
Sales (purchases) of trading securities, net 1,113,599 (1,127,927) 2,998,950
Realized gains on trading securities (114,510) (39,377) (37,260)
Unrealized holding losses (gains) on trading securities 110,417 (16,033) 105,929
Gains on property sales (608,717) (5,883,451) (1,648,894)
Provisions for impairment 2,300,000 373,529 --
Minority interest in income 137,543 2,544,050 250,015
Equity in joint venture losses 812,654 131,065 124,480
Deferred income tax expense (benefit) 2,859,328 1,055,000 (901,000)
Change in assets and liabilities:
Accounts receivable, net 420,972 29,339 (837,332)
Accounts payable and accrued expenses 786,093 (830,826) 295,140
Other, net 340,501 (45,069) 198,690
-------------- -------------- --------------
Net cash provided by (used in) operating activities 1,668,030 (331,900) 3,557,559
-------------- -------------- --------------
Cash flows from investing activities:
Principal receipts on notes receivable 695,094 288,075 704,970
Originations of notes receivable (897,500) (400,000) (1,018,721)
Acquisitions of businesses and hotels (1,127,144) (506,041) (707,783)
Capital expenditures (3,430,915) (2,990,276) (5,966,947)
Investments in joint ventures (604,114) -- (148,873)
Proceeds from property sales 1,202,088 8,043,247 989,064
Acquisition of additional partnership interests -- (110,000) (60,000)
-------------- -------------- --------------
Net cash provided by (used in) investing activities (4,162,491) 4,325,005 (6,208,290)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from notes payable 3,309,119 2,762,902 2,969,091
Repayments of notes payable (1,209,732) (2,663,520) (1,723,092)
Net proceeds from refinancing of notes payable -- -- 374,440
Distributions to minority interest holders (223,765) (3,206,894) (298,590)
Proceeds from issuance of common shares -- 101,080 --
Issuance costs of preferred stock (53,329) -- --
Purchase of treasury shares (141,767) (36,261) (48,698)
Preferred stock dividends paid (231,250) (163,750) (300,000)
-------------- -------------- --------------
Net cash provided by (used in) financing activities 1,449,276 (3,206,443) 973,151
-------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (1,045,185) 786,662 (1,677,580)
Cash and cash equivalents at beginning of year 2,390,856 1,604,194 3,281,774
-------------- -------------- --------------
Cash and cash equivalents at end of year $ 1,345,671 2,390,856 1,604,194
============== ============== ==============
(Continued)
22
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999, and 1998
2000 1999 1998
--------------- -------------- --------------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest, net of interest capitalized
of $30,571 in 2000, $34,024 in 1999, and $48,542 in 1998 $ 2,857,421 3,362,708 2,765,901
============== ============== ==============
Cash paid during the year for income taxes $ 71,328 12,000 --
============== ============== ==============
Supplemental disclosures of noncash and partial cash investing
and financing activities:
During 2000, the Company recorded the following partial cash activity relating
to the sale of three hotels and a parcel of unimproved land:
Proceeds:
Cash, net of closing costs $ 1,202,088
Notes receivable 550,000
--------------
1,752,088
--------------
Basis of assets sold:
Property and equipment, net 4,563,459
Notes payable (3,509,808)
Other, net 89,720
--------------
1,143,371
--------------
Gain on sales, net $ 608,717
==============
During 2000, the Company recorded the following partial cash activity relating
to the acquisition of three hotels:
Costs:
Cash $ 992,556
Notes receivable applied 225,694
Notes payable issued or assumed 3,767,800
Minority interest holder's contribution 400,000
--------------
$ 5,386,050
==============
Allocated to:
Property and equipment $ 5,283,331
Deferred costs 102,719
--------------
$ 5,386,050
==============
During 2000, the Company recorded the following partial cash activity relating
to the acquisition of management contracts on three hotel properties:
Costs:
Cash $ 134,588
Common stock issued - 19,226 shares 96,130
--------------
Allocated to deferred costs $ 230,718
==============
(Continued)
23
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999, and 1998
During 1999, the Company recorded the following partial cash activity relating
to the sale of a 150-room hotel in Orlando, Florida:
Gross sales price $13,500,000
Gross sales price allocated to management and
franchise contract termination (1,446,590)
--------------
Net sales price 12,053,410
Payoff of note payable 4,383,335
Other costs 330,505
--------------
Net cash proceeds 7,339,570
--------------
Basis of assets sold:
Property and equipment, net 6,191,988
Note payable (4,383,335)
Other 149,305
--------------
1,957,958
--------------
Gain on sale 5,381,612
Minority interest holder's share of gain on sale (2,319,182)
--------------
Company share of gain on sale $ 3,062,430
==============
During 1999, the Company also recorded the following partial cash activity
relating to the sale of one other hotel and leasehold interests in four hotels:
Proceeds:
Cash, net of closing costs $ 703,677
Notes receivable 825,000
--------------
1,528,677
--------------
Basis of assets sold:
Property and equipment, net 896,829
Leasehold interests, net 655,009
Note payable (525,000)
--------------
1,026,838
--------------
Gain on sales, net $ 501,839
==============
During 1999, the Company recorded the following partial cash activity relating
to the acquisition of management contracts on nine hotel properties:
Costs:
Cash $ 506,041
Common stock issued - 65,378 shares 392,268
--------------
Allocated to deferred costs $ 898,309
==============
(Continued)
24
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999, and 1998
During 1999, the Company acquired additional control in a partnership which owns
a hotel property subject to mortgage notes payable. Prior to 1999, the Company's
investment in the partnership had been accounted for on the equity method. Due
to the increase in control, the 1999 financial statements include the accounts
of the partnership on a consolidated basis. The noncash impact on investing and
financing activities of consolidating the partnership in 1999 was as follows:
Investing:
Increase in property and equipment, net $ 3,956,581
Decrease in investments in partnerships (365,907)
--------------
$ 3,590,674
==============
Financing:
Increase in notes payable $ 3,091,339
Increase in minority interests 502,015
Other, net (2,680)
--------------
$ 3,590,674
==============
In May 1998, the Company recorded the following partial cash activity relating
to the acquisition of a 121-room hotel in Norcross, Georgia:
Costs:
Cash $ 191,148
Payables 31,953
Note payable assumed 3,818,798
--------------
Property and equipment $ 4,041,899
==============
In June 1998, the Company recorded the following partial cash activity relating
to the acquisition of leasehold interests in seven hotels owned by Host Funding,
Inc.:
Costs:
Cash $ 516,635
Common stock issued 400,000
Notes payable issued 400,000
--------------
$ 1,316,635
==============
Allocated to:
Lessor's common stock $ 288,000
Leasehold interests 1,028,635
--------------
$ 1,316,635
==============
In August and September 1998, the Company recorded the following partial cash
activity relating to the refinancing of four owned hotels:
New notes payable issued $ 4,885,000
Discharge of old notes payable (4,323,476)
Notes payable issuance costs (187,084)
--------------
Net proceeds $ 374,440
==============
(Continued)
25
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 2000, 1999, and 1998
In 1998, the Company recorded the following partial cash activity relating to
the sales of leasehold interests in eight hotels:
Proceeds:
Cash, net of closing costs $ 989,064
Notes receivable, net 1,655,000
--------------
2,644,064
--------------
Basis in leasehold interests sold:
Leasehold interests, net 270,002
Leasehold improvements, net 725,168
--------------
995,170
--------------
Gains on leasehold interest sales, net $ 1,648,894
==============
See accompanying notes to consolidated financial statements.
1345332v1
26
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(1) The Company
Buckhead America Corporation (the Company) was created in December 1992 and
effectively commenced operations on January 1, 1993. The Company operates
in the hospitality industry and its principal holdings include hotels,
loans, leasehold interests and other investments secured by hotels, hotel
management contracts, hotel franchising rights, and other related assets.
Its principal product is the Country Hearth Inn midpriced hotel franchise
system.
The primary activities of the Company involve the franchising of the
Country Hearth Inn chain, limited-service hotel management and the
operation, development, and sales of hotel properties.
(2) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. They also
include, on a consolidated basis, the accounts of two partnerships and
one company controlled by the Company, each of which owns a hotel
subject to a nonrecourse mortgage. The accounts of these entities are
consolidated on a gross basis with the minority interests reflected
separately on a net basis. All significant intercompany balances and
transactions have been eliminated in the consolidated financial
statements.
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities as of the balance
sheet date and revenues and expenses during the reporting period to
prepare these financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual
results could differ from those estimates.
(b) Revenue Recognition
Hotel revenues are recognized as earned, which is generally defined as
the date upon which a guest occupies a room and utilizes the hotel's
services.
Initial franchise fees are recognized as income upon receipt as the
Company has no future obligations associated with the initial fees.
The Company also receives continuing royalty, marketing, and other
fees based upon a percentage of each franchisee's room revenues. These
continuing fees are recognized when earned. Management fees are
generally based on a percentage of each managed hotel's gross revenues
and are recognized when earned.
Investment income is recognized as earned. Changes in the market value
of investments classified as trading securities are included in
investment income.
(c) Cash and Cash Equivalents
Cash and cash equivalents include demand and savings deposits with
financial institutions and cash on hand. Restricted cash includes
funds held by trustees for the benefit of the Company or its
creditors. The Company considers all highly liquid instruments with
maturities of less than three months to be cash equivalents.
27
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(d) Investment Securities
The Company has classified all of its investments as either "trading"
or "available-for-sale." Available-for-sale securities are recorded at
fair value with unrealized gains and losses, net of the related tax
effect, reported as other comprehensive income. Trading securities are
also recorded at fair value with unrealized gains and losses reported
as investment income in the consolidated statements of income (loss).
Available-for-sale securities are classified as long-term, while
trading securities are classified as current in the accompanying
consolidated balance sheets.
(e) Notes Receivable
Notes receivable are recorded at cost, less the related general
allowance for doubtful accounts and any allowances for impaired notes
receivable. The Company, considering current information and events
regarding the borrowers' ability to repay their obligations, values
its notes receivable, for which it is probable that the Company will
be unable to collect the full amount due in accordance with the note
agreement, at the present value of the expected future cash flows,
market price of the loan, if available, or the value of the underlying
collateral, if any. The Company does not accrue interest for notes
receivable considered to be impaired. Cash receipts on impaired notes
receivable is either applied against principal or may be reported as
interest income depending on management's judgment as to the
collectibility of principal.
(f) Property and Equipment
Property and equipment is stated at cost, less accumulated
depreciation.
Depreciation on property and equipment is calculated on the
straight-line method over the estimated useful lives of the assets.
Property and equipment held under capital leases and leasehold
improvements are amortized over the shorter of the lease term or
estimated useful life of the asset. Estimated useful lives of property
and equipment are as follows:
Buildings 25 to 40 years
Furniture, fixtures, and equipment 5 to 10 years
Leasehold improvements 5 to 20 years
(g) Property and Leasehold Interests Held for Sale
Property and leasehold interests held for sale are stated at the lower
of cost or fair value less costs to sell. Fair value of property and
leasehold interests held for sale has been determined by the Company
based upon current market information. At the date on which a decision
is made to dispose of a property or leasehold interest, any amount by
which the carrying amount of an asset exceeds the fair value less cost
to sell is reported as a provision for impairment. Due to the intent
of the Company to dispose of such properties and leasehold interests
in the short-term, the properties, leasehold interests, and all
related notes payable have been reflected as current in the
accompanying balance sheets. The Company has the ability to remove
such properties and leasehold interests from operations at the current
time.
(h) Deferred Costs
Deferred costs include the costs associated with the acquisition of
trademark rights and franchise licenses which are amortized on a
straight-line basis over the estimated useful lives of the assets,
which range from 10 to 20 years. Deferred costs also include
unamortized note payable issuance costs which are amortized over the
28
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
term of the related notes payable. Deferred costs also include the
acquisition costs of long-term hotel management contracts which are
amortized over the related terms of the contracts.
(i) Leasehold Interests
Leasehold interests are intangible assets that represent the right to
operate certain hotel properties, inclusive of the right to use the
properties under existing lease agreements, and are stated at cost,
less accumulated amortization. Amortization is calculated on the
straight-line method over the terms of the related leases.
(j) Other Assets
Other assets primarily consist of deposits and investments in
partnerships or corporate joint ventures other than those which are
consolidated due to control. Investees in which the Company has the
ability to exercise significant influence are accounted for using the
equity method.
(k) Treasury Stock
Treasury stock is stated at cost. In noncash exchanges, fair value
represents cost.
(l) Marketing Costs
The Company incurs costs for various marketing and advertising
efforts. All costs related to marketing and advertising are expensed
in the period incurred. Marketing costs amounted to $1,235,054,
$1,156,983, and $1,114,777 for the years ended December 31, 2000,
1999, and 1998, respectively, and are included in franchise operations
expense ($335,147, $101,161, and $123,625, respectively) and in hotel
operations expense ($899,907, $1,055,822, and $991,152, respectively)
in the accompanying consolidated statements of income (loss).
(m) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is recognized when it appears it
is more likely than not that some or all of deferred tax assets will
not be realized.
(n) Fair Value of Financial Instruments
Management believes that the carrying amounts of cash and cash
equivalents, accounts receivable, accounts payable and accrued
expenses, and current portions of notes receivable and payable are
reasonable approximations of their fair value because of the
short-term nature of these instruments.
29
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
The fair value of noncurrent portions of notes receivable is
determined as the present value of expected future cash flows
discounted at the interest rate currently offered by the Company,
which approximates rates currently offered by local lending
institutions for loans of similar terms to companies with comparable
credit risk. Based on this valuation methodology, management believes
that the carrying amount of the noncurrent portions of notes
receivable is a reasonable approximation of its fair value.
Investment securities (both trading and available-for-sale) are stated
at fair value in the accompanying consolidated balance sheets. These
fair values are based on quoted market prices at the reporting date
for those or similar investments.
The fair value of the Company's noncurrent portions of notes payable
is estimated by discounting the future cash flows of each instrument
at rates currently offered to the Company for similar debt instruments
of comparable maturities by the Company's bankers. Based on this
valuation methodology, management believes that the carrying amount of
the noncurrent portions of notes payable is a reasonable estimation of
its fair value.
(o) Stock Options
The Company accounts for its stock options in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation, which encourages entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123
allows entities to continue to apply the provisions of Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and record compensation expense on the date of grant
only if the current market price of the underlying stock exceeds the
exercise price. In addition, pro forma net income and pro forma
earnings per share disclosures for employee stock option grants must
be provided as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company continues to apply the provisions of APB
Opinion No. 25 and provides the pro forma disclosures required by SFAS
No. 123.
(p) Impairment of Long-Term Assets
Property and equipment, deferred costs and leasehold interests are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets may not be
recoverable. Recoverability is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be
generated by the asset. If an asset is considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the asset exceeds the fair value of the asset.
(q) Comprehensive Income (Loss)
Comprehensive income (loss) of the Company consists of net income
(loss) and net unrealized gains (losses) on investment securities
(other comprehensive income (loss)) and is presented in the
consolidated statements of shareholders' equity and comprehensive
income (loss). Other comprehensive income (loss) does not affect the
Company's consolidated results of operations.
(r) Reportable Segments
The Company reports both quantitative and qualitative information
regarding its reportable operating segments. Operating segments are
determined by assessing what information is reviewed by the chief
operating decision maker in evaluating the performance of the Company.
30
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
The Company has determined its reportable operating segments to be
hotel operations, management, and franchising and has presented the
required information for each of these segments.
(s) Reclassifications
Certain reclassifications have been made to the 1999 and 1998 balances
to conform with classifications adopted in 2000.
(t) Effect of New Accounting Pronouncements
On December 3, 1999, the Securities and Exchange Commission released
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements. The Staff's expressed intent in this bulletin
was not to change current guidance, but rather to clarify existing
guidance summarizing certain of the SEC staff's reviews in applying
accounting principles generally accepted in the United States of
America to revenue recognition circumstances. SAB No. 101 reiterated
four criteria for revenue recognition: (1) persuasive evidence of an
arrangement exists, (2) delivery has occurred or services are
rendered, (3) the seller's price to purchase is fixed and
determinable, and (4) collectibility is reasonably assured.
The Company implemented SAB No. 101, as required, in the fourth
quarter of the fiscal year ended December 31, 2000. The revenue
recognition criteria in SAB No. 101 were consistent with the Company's
existing revenue recognition policies and, as a result, the
implementation of SAB No. 101 did not have a material effect on the
Company's financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Certain Hedging Activities.
In June 2000, the FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activity, an Amendment of
SFAS 133. SFAS No. 133 and SFAS No. 138 require that all derivative
instruments be recorded on the balance sheet at their respective fair
values. SFAS No. 133 and SFAS No. 138 are effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000; the
Company adopted SFAS No. 133 and SFAS No. 138 on January 1, 2001. The
Company does not expect the adoption of SFAS No. 133 and SFAS No. 138
to have a material effect on the Company's financial statements as the
Company had no derivative instruments as of December 31, 2000.
31
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(3) Cash and Cash Equivalents
Cash and cash equivalents at December 31, 2000 and 1999 included the
following:
2000 1999
-------------- -------------
Unrestricted cash:
Operating accounts, money market funds,
and overnight investments $ 660,304 961,989
Hotel operating accounts, savings
accounts, and cash on hand 302,721 942,707
-------------- -------------
963,025 1,904,696
-------------- -------------
Restricted cash:
Mortgage-related escrows (a) 382,646 436,160
Insurance deposits (b) -- 50,000
-------------- -------------
382,646 486,160
-------------- -------------
$ 1,345,671 2,390,856
============== =============
(a) Mortgage-related escrows are standard reserve accounts held by or on
behalf of the holders of mortgages on certain Company properties (note
8). Such amounts are restricted to the payment of insurance, property
taxes, and/or property and equipment replacements and enhancements
relating to the mortgaged properties.
(b) The Company is self-insured for workers' compensation liabilities
relating to certain employees in certain locations. Some states
require deposits be made by self-insuring companies. Such deposits are
restricted to the payment of workers' compensation claims which are
otherwise not settled.
32
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(4) Investment Securities
The amortized cost, gross unrealized holding gains, gross unrealized
holding losses, and fair value for trading and available-for-sale
securities by investment type and class of investment at December 31, 2000
and 1999, are as follows:
2000
-----------------------------------------------------------------------
Gross Gross
unrealized unrealized
Amortized holding holding Fair
cost gains losses value
-------------- --------------- -------------- ----------------
Trading securities:
Equity securities $ 9,332 14,728 (3,377) 20,683
Third-party managed
funds 179,118 2,949 -- 182,067
-------------- --------------- -------------- ----------------
188,450 17,677 (3,377) 202,750
Available-for-sale
securities - equity
securities 288,000 -- (245,229) 42,771
-------------- --------------- -------------- ----------------
Total $ 476,450 17,677 (248,606) 245,521
============== =============== ============== ================
1999
-----------------------------------------------------------------------
Gross Gross
unrealized unrealized
Amortized holding holding Fair
cost gains losses value
-------------- --------------- -------------- ----------------
Trading securities:
U.S. government and
agency obligations $ 986,109 -- -- 986,109
Equity securities 11,812 103,007 (4,521) 110,298
Third-party managed
funds 189,618 26,231 -- 215,849
-------------- --------------- -------------- ----------------
1,187,539 129,238 (4,521) 1,312,256
Available-for-sale
securities - equity
securities 288,000 -- (148,023) 139,977
-------------- --------------- -------------- ----------------
Total $ 1,475,539 129,238 (152,544) 1,452,233
============== =============== ============== ================
Equity securities are primarily concentrated in hospitality related
companies.
The available-for-sale securities were acquired in 1998 in connection with
the purchase of certain leases (note 7) and are restricted as to their
sale. Other comprehensive loss in 2000 and 1998 consists of an unrealized
loss on available-for-sale securities of $97,206 and $148,023,
respectively. There was no change in this unrealized loss in 1999.
Third party managed funds consist of trading securities held by a Rabbi
Trust for the benefit of certain employees who participate in a Company
deferred compensation plan. Such funds are restricted to the payment of
deferred compensation liabilities. Such liabilities are included in "other
liabilities" in the accompanying consolidated balances sheets at amounts
equal to the fair value of the restricted funds. None of the third-party
managed funds are invested in the common stock of the Company.
33
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Proceeds from the sale of trading securities were $1,133,099, $3,500,000,
and $3,000,000 in 2000, 1999, and 1998, respectively. Net realized gross
gains calculated on a specific identification basis and included in
investment income were $114,510, $39,377, and $37,260 in 2000, 1999, and
1998, respectively.
(5) Notes Receivable
Notes receivable at December 31, 2000 and 1999 consist of the following:
2000
-----------------------------------------------------
Other
Secured notes Total
------------- -------------- ----------------
Principal $ 3,899,005 1,004,361 4,903,366
Less allowances 284,071 92,080 376,151
------------- -------------- ----------------
3,614,934 912,281 4,527,215
Less current portions 388,908 443,147 832,055
------------- -------------- ----------------
Noncurrent portions $ 3,226,026 469,134 3,695,160
============= ============== ================
Number of notes 19 15 34
============= ============== ================
1999
-----------------------------------------------------
Other
Secured notes Total
------------- -------------- ----------------
Principal $ 3,542,587 834,067 4,376,654
Less allowances 284,071 92,080 376,151
------------- -------------- ----------------
3,258,516 741,987 4,000,503
Less current portions 192,228 325,642 517,870
------------- -------------- ----------------
Noncurrent portions $ 3,066,288 416,345 3,482,633
============= ============== ================
Number of notes 19 11 30
============= ============== ================
The secured notes are primarily collateralized by mortgages and leasehold
interests on hotel properties.
Seven notes with aggregate balances of $2,031,275 as of December 31, 2000,
collateralized by leasehold interests on hotel properties, have been
pledged by the Company as collateral for a line-of-credit with a bank (note
8).
The recorded investment in impaired notes receivable as of December 31,
2000 and 1999 was $906 and the Company has fully reserved for these notes.
Cash received in payment of impaired notes during 2000, 1999, and 1998
amounted to $-0-, $16,174, and $9,938, respectively.
34
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
The activity in the allowance for doubtful notes receivable for the years
ended December 31, 2000, 1999, and 1998 was as follows:
2000 1999 1998
------------ ------------ ------------
Allowance for doubtful notes receivable at
beginning of year $ 376,151 376,151 57,874
Allowances recorded in connection with
leasehold interest sales (note 7) -- -- 350,215
Additions charged to bad debt expense -- 16,174 --
Write-downs charged against the allowance -- -- (22,000)
Collections on impaired notes -- (16,174) (9,938)
------------ ------------ ------------
Allowance for doubtful notes receivable
at end of year $ 376,151 376,151 376,151
============ ============ ============
(6) Property and Leasehold Interests Held for Sale and Property and Equipment
Property and leasehold interests held for sale at December 31, 2000 and
1999 consist of the following:
2000 1999
----------------- ---------------
Property and equipment (13 hotels at December 31, 2000 and
four hotels at December 31, 1999) $ 20,194,012 8,364,083
Leasehold interests (four hotels at December 31, 2000) 2,879,591 --
Other, principally land 323,443 --
Allowance for impairment (2,123,529) (250,000)
----------------- ---------------
$ 21,273,517 8,114,083
================= ===============
35
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Property and equipment at December 31, 2000 and 1999 consist of the
following:
2000 1999
--------------- ----------------
Owned hotel properties (9 in 2000 and 16 in 1999):
Land and buildings $ 19,583,047 28,991,188
Furniture, fixtures, and equipment 2,307,322 3,328,214
--------------- ----------------
21,890,369 32,319,402
Accumulated depreciation (1,481,080) (2,681,531)
--------------- ----------------
20,409,289 29,637,871
--------------- ----------------
Leased hotel properties (11 in 2000 and 16 in 1999):
Leasehold improvements 282,169 1,344,847
Furniture, fixtures, and equipment 158,612 834,499
--------------- ----------------
440,781 2,179,346
Accumulated depreciation (80,267) (256,702)
--------------- ----------------
360,514 1,922,644
--------------- ----------------
Construction-in-progress -- 111,433
--------------- ----------------
Other:
Land 39,317 200,889
Other 348,581 239,339
--------------- ----------------
387,898 440,228
Accumulated depreciation (190,625) (132,934)
--------------- ----------------
197,273 307,294
--------------- ----------------
$ 20,967,076 31,979,242
=============== ================
In 1999, the Company completed the sale of the Country Hearth Inn located
in Orlando, Florida for $13.5 million. The Company held an approximate 59%
interest in the partnership which owned the hotel in addition to holding
franchise and hotel management contracts relating to the operation of the
property. After retirement of an approximate $4.4 million first mortgage
loan, payment of certain fees, costs, bonuses, and minority interest
shares, the Company's share of net proceeds was approximately $5.5 million.
The Company continued to operate the property under an agreement with
Orange County, Florida (the purchaser) until January 2001 at which time the
property was demolished to make way for expansion of the Orange County
Convention Center. Hotel revenues in 2000, 1999, and 1998 from this hotel
amounted to $3,163,064, $3,466,067, and $4,029,107, respectively. Income
before taxes from this hotel included in the Company's hotel operations
segment (note 16) in 2000, 1999, and 1998 amounted to $991,453, $905,334,
and $607,104, respectively.
The Company's share of the 1999 gain on sale, net of the minority
interests' share approximated $3.1 million. The Company also received
franchise termination fees and hotel management fees of approximately
$640,000 and $605,000, respectively. Such fees are included in the
Company's franchising and management operating segments (note 16).
During 1999, the Company began to actively market for sale five hotel
properties. The statement of income for the year ended December 31, 1999
includes a provision for impairment of $373,529 which represented
management's estimate of losses expected to be incurred in connection with
the hotel sales. One of the hotel properties was sold in 1999 resulting in
a loss of $123,529 which was charged to the allowance for impairment. As of
December 31, 1999, four properties with an aggregate net carrying value of
36
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
$8,114,083 remained held for sale. In January 2000, another hotel property
was sold resulting in a charge to the remaining allowance for impairment of
$176,471. In late 2000, the Company began to market additional hotel
properties and as of December 31, 2000, had 17 properties classified and
held for sale. The Company recorded additional provisions for impairment of
$2,050,000 relating to these hotels. Also, the Company recorded a $250,000
impairment provision relating to certain leasehold interests which are not
held for sale (note 7).
Revenues and expenses for the years ended December 31, 2000, 1999, and 1998
relating to the properties held for sale were as follows:
2000 1999 1998
------------- -------------- -------------
Hotel revenues $ 8,155,669 8,638,297 7,946,718
Less:
Hotel operations expense 6,354,417 6,456,707 5,859,683
Rent 376,382 244,548 249,537
Depreciation 705,536 853,458 861,114
Interest 1,327,302 1,403,548 1,236,436
------------- -------------- -------------
Loss before income taxes $ 607,968 319,964 260,052
============= ============== =============
The revenues and expenses relating to hotel properties held for sale are
included in the Company's hotel operations business segment (note 16).
All of the Company's owned hotel properties are encumbered by mortgage
obligations (note 8).
During 1999, the Company acquired additional control in a partnership which
owns a 93-room hotel property in Mason, Ohio (Mason Hotel). Prior to 1999,
the Company's investment in the partnership had been accounted for on the
equity method (note 7). Due to the increase in control, the accompanying
2000 and 1999 financial statements include the accounts of this partnership
on a consolidated basis with the minority interests reflected separately on
a net basis.
37
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(7) Deferred Costs, Leasehold Interests, and Other Assets
Deferred costs at December 31, 2000 and 1999 consist of the following:
2000 1999
--------------- -------------
Country Hearth Inn franchise system:
Trademark rights $ 584,300 584,300
Franchise licenses 939,778 939,778
Other deferred costs 260,400 247,885
--------------- -------------
1,784,478 1,771,963
Accumulated amortization (716,333) (590,333)
--------------- -------------
1,068,145 1,181,630
--------------- -------------
Hotel management contract acquisition costs 1,254,027 898,309
Accumulated amortization (161,886) (25,000)
--------------- -------------
1,092,141 873,309
--------------- -------------
Notes payable acquisition costs, net 375,175 439,084
--------------- -------------
Other, net -- 19,226
--------------- -------------
$ 2,535,461 2,513,249
=============== =============
Leasehold interests represent the cost of leasehold rights in real property
acquired by the Company and consist of the following at December 31, 2000
and 1999:
2000 1999
--------------- -------------
Leasehold interests $ 1,028,635 2,851,984
Accumulated amortization (108,105) (325,385)
--------------- -------------
920,530 2,526,599
Allowance for impairment (250,000) --
--------------- -------------
$ 670,530 2,526,599
=============== =============
During 1999, the Company sold four leasehold interests in hotel properties.
The Company received net proceeds of approximately $500,000 in cash and
$825,000 in notes receivable. The notes receivable are secured by the
related leasehold interests. The Company recorded approximately $500,000 in
gains in connection with those sales. The Company remains contingently
liable for rent payments due in accordance with the leases on certain of
the properties (note 9).
During 1998, the Company sold eight leasehold interests in hotel
properties. The Company received net proceeds of approximately $990,000 in
cash and $1,655,000 in notes receivable. The notes receivable are secured
by the related leasehold interests. The Company recorded approximately $1.6
million in gains in connection with these sales. The Company remains
contingently liable for rent payments due in accordance with the leases on
certain of the properties (note 9).
38
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
In June 1998, the Company entered into leases for seven hotel properties
owned by Host Funding, Inc. (Host). The hotel properties are operated under
Super 8 (4) and Sleep Inn (3) license agreements. All of the leases are
accounted for as operating leases (note 9). The Company paid approximately
$500,000 in cash, $400,000 in common stock and $400,000 in notes payable
for the leasehold interests. In addition to the leases, the Company
received $288,000 of Host common stock; the remainder of the acquisition
fee was allocated to leasehold interests. The Company recorded a $250,000
provision for impairment in 2000 relating to these leases because a lender
has initiated foreclosure activities against Host on two of the properties.
Other assets at December 31, 2000 and 1999 consist of the following:
2000 1999
------------- -------------
Investments in joint ventures/partnerships $ 160,540 369,080
Other -- 57,415
------------- -------------
$ 160,540 426,495
============= =============
Investments in joint ventures/partnerships consists of investments in five
partnership entities, each of which owns a single hotel property. The
Company accounts for its interests on the equity method and recognized
aggregate losses from these entities of $812,654, $131,065, and $124,480
during 2000, 1999, and 1998, respectively.
Such losses are included in hotel operations expense in the Company's hotel
operations business segment (note 16). Another partnership which was
previously accounted for on the equity method is consolidated in the 2000
and 1999 financial statements (note 6). One of the partnerships sold its
hotel in 2000 and is no longer active. The aggregate losses described above
include losses from this partnership of $567,558 and $87,056 in 2000 and
1999, respectively, and income of $5,740 in 1998.
(8) Notes Payable
Notes payable at December 31, 2000 and 1999 consist of the following:
2000 1999
--------------- ---------------
Variable rate mortgage notes $ 2,866,907 2,974,040
Fixed rate mortgage notes 24,963,189 22,916,151
Unsecured subordinated notes 1,286,991 1,755,779
Convertible debenture notes, net of
unamortized discount 4,960,555 4,940,555
Revolving line of credit 850,000 --
Other notes payable 113,082 155,270
Capital lease obligations (note 9) 115,997 37,547
--------------- ---------------
35,156,721 32,779,342
Less current portions 18,803,712 8,681,568
--------------- ---------------
Noncurrent portions of notes payable $ 16,353,009 24,097,774
=============== ===============
39
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
The variable rate mortgage notes consist of four notes secured by four
hotel properties. The notes bear interest at prime plus 1% (10.5% at
December 31, 2000), require aggregate monthly payments of $32,916, and
mature at various dates through 2015.
The fixed rate mortgage notes consist of 19 notes secured by 17 hotel
properties. The notes bear interest at rates ranging from 8.00% to 10.25%
(weighted average at December 31, 2000 of 9.10%). The notes require
aggregate monthly payments of $276,834 and mature at various dates through
2020.
The unsecured subordinated notes consist of three notes which are due in
varying amounts of monthly and quarterly payments and mature at various
dates through December 2002. The stated balances represent the present
value of amounts to be paid at a discount rate of 9%.
The convertible debentures, which were issued to investment funds managed
by a related party (note 14), consist of five notes aggregating $5,000,000
net of unamortized original issue discount of $39,445 in 2000 and $59,445
in 1999. The notes bear interest at 8%, are unsecured, require quarterly
interest only payments, and mature in December 2002. Under the debenture
agreements, the holders also have certain rights of conversion (note 10).
The revolving line of credit has a variable interest rate (prime plus 1%)
and expires July 31, 2001. Payments of interest only are required monthly
and the total commitment under the line is $1,090,000. As of December 31,
2000, the Company has available credit under the line of $240,000. This
line of credit is secured by certain notes receivable (note 5).
The combined aggregate amount of maturities for all notes payable for each
of the next five years and thereafter is as follows:
Year ending December 31,
-----------------------------------
2001 $ 18,803,712
2002 6,060,391
2003 485,233
2004 2,574,816
2005 266,384
Thereafter 6,966,185
----------------
$ 35,156,721
================
Current portions of notes payable include $14,512,085 relating to 16 notes
secured by 13 hotel properties held for sale (note 6). The actual amount
required to be paid in the year 2001 under the terms of these notes is
$2,680,229.
The Company remains contingently liable on a mortgage note payable on which
the Company is guarantor relating to a property sold in 2000. The note's
balance at December 31, 2000 was approximately $2.2 million and the note is
due in monthly installments of $19,960 until 2018.
(9) Leases
The Company leases certain equipment under agreements that are classified
as capital leases. The leases have remaining terms ranging from one to five
years and have purchase options at the end of the original lease terms.
40
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Capital lease assets included in property and equipment at December 31,
2000 and 1999 are as follows:
2000 1999
------------- ---------------
Furniture, fixtures, and equipment $ 134,531 69,284
Accumulated amortization (20,240) (26,309)
------------- ---------------
$ 114,291 42,975
============= ===============
The Company operates several of its locations in leased facilities. These
leases are treated as operating leases and have terms ranging from 10 to 30
years with options to renew at varying terms. Certain of the leases provide
for contingent payments based upon a percent of revenues. Some leased
vehicles and equipment are also classified as operating leases.
Future minimum payments, by year and in the aggregate, under noncancelable
capital leases and operating leases with initial or remaining terms of one
year or more consist of the following at December 31, 2000:
Year ending Capital Operating
December 31, leases leases
--------------------- ------------- ---------------
2001 $ 31,368 2,914,956
2002 31,368 3,230,349
2003 31,368 2,972,970
2004 31,368 2,902,749
2005 26,140 2,841,569
Subsequent years -- 22,817,867
------------- ---------------
Total minimum lease payments 151,612 37,680,460
===============
Amounts representing interest 35,615
-------------
Present value of net minimum payments 115,997
Current portions 20,165
-------------
Long-term capitalized lease obligation $ 95,832
=============
Rental expense, including contingent rentals of $116,052 in 2000, $176,774
in 1999, and $230,376 in 1998, and net of sublease rentals of $122,921 in
2000, $78,040 in 1999, and $80,129 in 1998, for all operating leases was
$3,190,125 in 2000, $3,350,064 in 1999, and $3,300,307 in 1998.
Leases described in the preceding paragraphs include leases between the
Company and operating company whose principal shareholder was a director
and executive officer of the Company. Such amounts totaled $62,402 in 2000,
$60,512 in 1999, and $69,984 in 1998. Total future minimum payments under
this related party lease amount to $374,942.
The Company remains contingently liable for future minimum rental payments
of $2,399,633 on sold leasehold interests (note 7) and on subleased and
assigned properties and equipment in the event of default by the
purchasers, sublessees and assignees.
41
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(10) Capital Structure and Net Income (Loss) Per Share
Preferred Stock
In connection with an acquisition in 1997, the Company issued 30,000 shares
of Series A (par value $100) preferred stock. The Series A preferred stock
was nonvoting and accrued cumulative dividends at the rate of 10% per
annum, payable when and to the extent declared by the Company's Board of
Directors. Pursuant to a settlement agreement finalized in 2000, all of the
outstanding shares of Series A preferred stock were exchanged for an equal
number of shares of Series B (par value $100) preferred stock. The Series B
preferred stock is nonvoting and accrues cumulative dividends at the rate
of 9.25% per annum, payable when and to the extent declared by the
Company's Board of Directors. All accrued but unpaid dividends of the
Series B preferred stock must be paid in full before any cash dividend may
be declared on the Company's common stock. As of December 31, 2000, there
was $46,250 of cumulative preferred dividends in arrears.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding-up of the Company, the holders of the Series B preferred stock
shall be entitled to receive, prior and in preference to any distribution
to the holders of the Company's common stock, an amount equal to the par
value of the preferred shares held plus any unpaid cumulative dividends.
At any time after September 17, 2004, each holder of Series B preferred
stock may convert any or all such stock, at par, into common shares of the
Company. The conversion price for such common shares shall be the market
price of such shares immediately prior to conversion.
At any time after September 17, 2004, the Company may convert all of the
Series B preferred stock, at 110% of par, into common shares of the
Company. The conversion price for such common shares shall be the market
price of such shares immediately prior to conversion. If the Company
converts the Series B preferred stock into common shares of the Company,
the holders of such converted shares have certain rights for a limited time
period to put the shares back to the Company for cash.
Convertible Debentures
The convertible debentures (note 8) are convertible into common shares of
the Company any time at the option of the holder at a price of $9 per
share. If all such debentures were converted, an additional 555,555 shares
of common stock would be issued.
42
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
Net Income (Loss) Per Share
The following table sets forth the computations of basic and diluted net
income (loss) per common share for the years ended December 31, 2000, 1999,
and 1998:
2000 1999 1998
------------ ------------ ------------
Numerator:
Net income (loss) $(8,273,121) 1,668,957 1,235,495
Less preferred stock dividends (277,500) (300,000) (300,000)
------------ ------------ ------------
Numerator for basic net income (loss) per
common share (8,550,621) 1,368,957 935,495
Add preferred stock dividends (assumed converted) -- 300,000 --
Add back debenture interest, net of tax (assumed
converted) -- 248,000 248,000
------------ ------------ ------------
Numerator for diluted net income (loss) per common
Share $(8,550,621) 1,916,957 1,183,495
============ ============ ============
Denominator:
Denominator for basic net income (loss) per common share:
Actual weighted-average shares outstanding 2,022,946 1,983,114 1,926,511
Effect of dilutive securities:
Preferred stock -- 558,423 --
Convertible debentures -- 555,555 555,555
Outstanding stock options -- 30,189 45,852
------------ ------------ ------------
Denominator for diluted net income (loss) per common
Share 2,022,946 3,127,281 2,527,918
============ ============ ============
Net income (loss) per common share:
Basic $ (4.23) 0.69 0.48
============ ============ ============
Diluted $ (4.23) 0.61 0.47
============ ============ ============
The assumed conversion of the convertible preferred stock, convertible
debentures, and in-the-money stock options was excluded from the
computation of diluted net income (loss) per common share in 2000 because
the effect would be antidilutive.
The assumed conversion of the convertible preferred stock was excluded from
the computation of diluted net income per common share in 1998 because the
effect would be antidilutive.
(11) Other Income and Expense
During the fourth quarter of 2000, the employment of an executive officer
and certain other officers and employees of the Company terminated. The
Company recognized severance and other one-time costs relating to such
terminations of $207,000 in 2000.
Other income in 1998 includes $510,000 from favorable settlements of
certain bankruptcy claims and changes in estimates of allowed amounts of
remaining unsettled claims (note 14).
43
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(12) Income Taxes
Total income tax expense (benefit), principally Federal and all deferred,
recognized differs from the amount computed by applying the U.S. Federal
income tax rate of 34% to pretax income (loss) as a result of the
following:
2000 1999 1998
------------- ------------- --------------
Computed "expected" tax expense (benefit) $(1,841,000) 926,000 114,000
Increase (reduction) in income taxes resulting from:
State taxes, net of Federal tax benefit (216,000) 108,000 13,000
Increase (decrease) in valuation allowance for
deferred tax assets 4,845,000 65,000 (1,028,000)
Other 71,328 (44,000) --
------------- ------------- --------------
$ 2,859,328 1,055,000 (901,000)
============= ============= ==============
At December 31, 2000, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $10.4 million which are
available to offset future taxable income, if any, and expire at dates from
2006 through 2020.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of December 31, 2000 and
1999 are presented below:
2000 1999
--------------- ---------------
Deferred tax assets:
Notes receivable allowances $ 128,000 128,000
Asset impairment allowances 890,000 85,000
Net operating loss and AMT carryforwards 3,536,000 2,405,000
Partnership basis differences 650,000 650,000
Effect of state income taxes 523,000 307,000
Other 45,000 40,000
--------------- ---------------
Total deferred tax assets 5,772,000 3,615,000
Less valuation allowance (4,972,000) (127,000)
--------------- ---------------
Deferred tax assets 800,000 3,488,000
Deferred tax liabilities - Acquired property and equipment basis
differences (800,000) (700,000)
--------------- ---------------
Net deferred tax assets $ -- 2,788,000
=============== ===============
The valuation allowance for deferred tax assets as of December 31, 2000 and
1999 was $4,972,000 and $127,000, respectively. The net change in the total
valuation allowance for the year ended December 31, 2000 was an increase of
$4,845,000, for the year ended December 31, 1999 an increase of $65,000,
and for the year ended December 31, 1998 a decrease of $1,028,000.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income by the
Company during the periods in which those temporary differences become
deductible. Management considers the projected future taxable income and
tax planning strategies in determining the valuation allowance.
44
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(13) Stock Option Plans
The Company's various Stock Option Plans authorized the issuance of options
for up to 520,000 shares of the Company's common stock. Granted options
vest one-third immediately, one-third on the first anniversary of the grant
date, and one-third on the second anniversary of the grant date. The
exercise price for all options represents the fair value of the common
stock at the grant date. Plan options terminate ten years after vesting, or
earlier under certain conditions.
The granted stock option activity is as follows:
Number Weighted-average
of shares exercise price
------------- -----------------------
Balance December 31, 1997 206,000 $ 5.27
Granted in 1998 90,000 7.37
------------- -----------------------
Balance December 31, 1998 296,000 $ 5.91
=======================
Granted in 1999 93,000 5.26
Exercised in 1999 (26,000) 3.89
Forfeited in 1999 (52,000) 6.59
------------- -----------------------
Balance December 31, 1999 311,000 $ 5.77
=======================
Granted in 2000 118,000 4.95
Exercised in 2000 -- --
Forfeited in 2000 (81,000) 6.04
------------- -----------------------
Balance December 31, 2000 348,000 $ 5.43
------------- -----------------------
The following table summarizes information concerning stock options
outstanding as of December 31, 2000:
Outstanding Exercisable
--------------------------------------------------- -----------------------------
Weighted- Weighted- Weighted-
Range of average average average
exercise remaining exercise exercise
prices Shares life price Shares price
------------------- ----------- -------------- ----------------- ----------- --------------
$ 3.44 60,000 5.3 years $ 3.44 60,000 $ 3.44
$ 4.31 - 6.13 36,000 7.2 years 5.27 30,667 5.43
$ 6.88 48,000 7.5 years 6.88 48,000 6.88
$ 7.37 54,000 8.5 years 7.37 54,000 7.37
$ 5.25 64,000 9.4 years 5.25 42,666 5.25
$ 5.00 86,000 9.4 years 5.00 28,667 5.00
----------- ----------- --------------
348,000 $ 5.43 264,000 $ 5.56
=========== ================= =========== ==============
No compensation expense has been recognized for the Company's stock option
plans. Had compensation cost for the Company's stock option plans been
determined based upon the fair value methodology prescribed under SFAS No.
123, the Company's net loss would have been increased by approximately
$168,000 or approximately $0.08 per common share (basic and diluted) in
2000 and the Company's net income would have been reduced by approximately
$113,000 or approximately $0.06 per common share (basic) and $0.04 per
common share (diluted) in 1999 and reduced by $151,000 or approximately
45
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
$0.08 per common share (basic) and $0.06 per common share (diluted) in
1998. The effects of either recognizing or disclosing compensation cost
under SFAS No. 123 may not be representative of the effects on reported net
income for future years. The fair value of options granted during 2000,
1999, and 1998 is estimated as $1.57, $1.65, and $2.31, respectively, on
the dates of grant using the Black-Scholes option-pricing model with the
following assumptions: dividend yield 0%, volatility 20%, risk-free
interest rate of 6.0%, and an expected life of five years.
(14) Related Party Transactions
The Company acted as administrator and was a beneficiary of the Days Inns
of America, Inc. ("Days Inns") Chapter 11 bankruptcy. Other income in 1998
includes $510,000 from favorable settlements of claims relating to such
bankruptcy.
The Company also acts as trustee for the Days Inns Creditors' Trust. The
Company was reimbursed $100,000 in 2000, 1999, and 1998 for expenses
incurred related to the Creditors' Trust. Other operating and
administrative expenses in the accompanying 2000, 1999, and 1998
consolidated statements of income are presented net of such amounts.
Other notes receivable (note 5) at December 31, 2000 and 1999 includes
$72,316 and $156,705, respectively, due from a former officer and director
of the Company. Such note bore interest at 10% and was fully repaid in
March 2001.
The convertible debentures (notes 8 and 10) were issued to investment funds
managed by a subsidiary of Bay Harbour Management, formerly known as Tower
Investment Group, Inc. (Bay Harbour). Bay Harbour owns or controls
approximately 30.1% of the Company's outstanding common stock. An executive
officer of Bay Harbour is on the Company's Board of Directors.
A director of the Company is a principal in a hotel brokerage company. Such
company acted as the broker in the sales of three hotels in 2000 in which
the Company owned or held an interest and four leasehold interest sales in
1999 (note 7) and received aggregate commissions of $210,875 in 2000 and
$63,000 in 1999 in connection therewith.
(15) Commitments
In conjunction with various agreements with Marion and Cass St. Corporation
(Cassland), owned by a significant shareholder, the Company is required to
advance a total of $135,000 per hotel property constructed by Cassland. The
Company then operates the properties under operating leases. The agreements
specify the construction of ten properties. As of December 31, 2000, the
Company had advanced Cassland a total of $765,000 and is required to
advance an additional $585,000 once certain construction points are
achieved. These advances are recorded as notes receivable with interest
accruing at a rate of 8% per annum. Hotel operations expense in 2000 and
1999 includes rent expense of $374,642 and $220,049, respectively, to
Cassland.
46
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
(16) Operating Segments
The Company conducts recurring operations in three segments of the
limited-service hotel industry - hotel franchising, hotel management, and
hotel operations. The Company generates additional revenues and results of
operations from hotel development activities.
Hotel franchising involves the selling and servicing of rights and licenses
comprising the Country Hearth Inn lodging system. Revenues include initial
fees and continuing royalty, marketing and reservation fees from Company
owned and leased hotels and from unaffiliated customers. Continuing fees
are based on each franchised hotel's room revenues.
Hotel management involves the oversight of day-to-day hotel operations and
accounting for limited-service and some full-service hotels. Revenues
include continuing fees from Company owned and leased hotels and from
unaffiliated customers. Continuing fees are based on each managed hotel's
revenues.
Hotel operations involves the operations of Company owned and leased
hotels. Revenues are generated from unaffiliated hotel guests. Hotel
operations also include the Company's share (equity method) of
unconsolidated entities which also operate hotels and the minority
interests' share of consolidated entities' results which are included in
hotel operations.
Hotel development activities involve the development and construction or
purchase of existing hotel properties and subsequent sale thereof along
with related activities such as servicing notes receivable generated from
sales. Corporate activities are generally administrative and also include
all interest income and expense which does not specifically relate to other
segment operations.
Franchise and management fees are charged to Company owned and leased
hotels at the same rates as charged to unaffiliated customers and are
eliminated in consolidation.
Condensed operating results, assets, and notes payable related to each
segment as of and for the years ended December 31, 2000, 1999, and 1998 are
presented below. Segment assets and notes payable exclude intercompany
balances which eliminate in consolidation. No specific assets or notes
payable relate to development activities and such activities are generally
conducted by corporate personnel on a nonrecurring basis. Thus, development
results are included with corporate results. Assets of hotel operations and
the related notes payable are reflected in the hotel operations segment
through the date of sale. Net gains from such sales are reflected in the
development and corporate segment. Capital expenditures in 2000, 1999, and
47
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2000 and 1999
1998 amounted to $3,430,915, $2,990,276, and $5,966,947, respectively, and
principally related to hotel operations. Income tax expense (benefit) is
not allocated to the various segments.
2000
-------------------------------------------------------------------------------------------------
Hotel Hotel Hotel Development
operations management franchising & corporate Eliminations Consolidated
------------- ------------- ------------ ------------- ------------- -------------
Revenues $23,717,220 1,975,169 1,784,142 1,065,673 (1,844,908) 26,697,296
Expenses 18,785,484 2,405,694 1,233,379 1,847,550 (1,844,908) 22,427,199
------------- ------------- ------------ ------------- -------------
EBITDAR* 4,931,736 (430,525) 550,763 (781,877) 4,270,097
Rent 2,601,020 -- -- -- 2,601,020
Depreciation and amortization 1,457,648 175,623 126,000 24,000 1,783,271
Provision for impairment -- -- -- 2,300,000 2,300,000
Interest 2,390,021 -- -- 609,578 2,999,599
------------- ------------- ------------ ------------- -------------
Income (loss) before
income taxes $(1,516,953) (606,148) 424,763 (3,715,455) (5,413,793)
============= ============= ============ ============= =============
Assets $44,556,598 1,750,233 1,205,057 5,852,584 53,364,472
============= ============= ============ ============= =============
Notes payable $28,059,175 7,097,546 35,156,721
============= ============= =============
1999
-------------------------------------------------------------------------------------------------
Hotel Hotel Hotel Development
operations management franchising & corporate Eliminations Consolidated
------------- ------------- ------------ ------------- ------------- -------------
Revenues $25,886,594 2,324,275 2,141,373 4,121,761 (1,801,876) 32,672,127
Expenses 18,770,851 1,815,896 1,120,353 1,702,913 (1,801,876) 21,608,137
------------- ------------- ------------ ------------- -------------
EBITDAR* 7,115,743 508,379 1,021,020 2,418,848 11,063,990
Rent 2,858,378 -- -- -- 2,858,378
Depreciation and amortization 1,620,372 56,471 120,000 12,000 1,808,843
Provision for impairment -- -- -- 373,529 373,529
Interest 2,599,222 -- -- 700,061 3,299,283
------------- ------------- ------------ ------------- -------------
Income before
income taxes $ 37,771 451,908 901,020 1,333,258 2,723,957
============= ============= ============ ============= =============
Assets $45,934,343 1,686,226 1,424,376 9,669,756 58,714,701
============= ============= ============ ============= =============
Notes payable $26,083,007 6,696,335 32,779,342
============= ============= =============
1998
-------------------------------------------------------------------------------------------------
Hotel Hotel Hotel Development
operations management franchising & corporate Eliminations Consolidated
------------- ------------- ------------ ------------- ------------- -------------
Revenues $25,720,086 1,193,417 1,320,327 2,525,395 (1,590,082) 29,169,143
Expenses 18,520,067 1,736,310 1,182,781 1,569,793 (1,590,082) 21,418,869
------------- ------------- ------------ ------------- -------------
EBITDAR* 7,200,019 (542,893) 137,546 955,602 7,750,274
Rent 2,660,488 -- -- -- 2,660,488
Depreciation and amortization 1,587,341 50,505 123,500 12,000 1,773,346
Interest 2,298,223 -- -- 683,722 2,981,945
------------- ------------- ------------ ------------- -------------
Income (loss) before
income taxes $ 653,967 (593,398) 14,046 259,880 334,495
============= ============= ============ ============= =============
Assets $47,454,314 759,474 1,333,294 9,994,036 59,541,118
============= ============= ============ ============= =============
Notes payable $27,408,994 7,199,435 34,608,429
============= ============= =============
*Earnings before interest, taxes, depreciation, amortization, and rent.
1345265
48
SUPPLEMENTARY FINANCIAL INFORMATION
Selected Quarterly Financial Data
The following selected quarterly financial data was derived from the
unaudited condensed consolidated financial statements of Buckhead America
Corporation included in the Company's Form 10-Q's for the quarterly periods
ended March 31, June 30, and September 30, 2000 and from the audited
consolidated financial statements for the year ended December 31, 2000 which are
included herein. The selected quarterly financial data should be read in
conjunction with such consolidated financial statements, including the notes to
those financial statements, which are incorporated by reference herein.
2000
-------------------------------------------------------
First Qtr Second Qtr Third Qtr Fourth Qtr
--------- ---------- --------- ----------
Total revenues $6,550,468 6,986,244 7,812,983 5,347,601
EBITDAR* 1,406,800 1,791,580 1,975,751 (904,034)
Net income (loss) (232,215) 10,888 19,511 (8,071,305)
Net income (loss) per common share - diluted (0.15) (0.03) (0.03) (4.02)
1999
-------------------------------------------------------
First Qtr Second Qtr Third Qtr Fourth Qtr
--------- ---------- --------- ----------
Total revenues $6,625,675 10,880,573 7,878,095 7,287,784
EBITDAR* 1,461,188 5,518,256 2,441,221 1,643,325
Net income (loss) (345,618) 2,119,723 279,640 (384,788)
Net income (loss) per common share - diluted (0.22) 0.70 0.10 (0.22)
* Earnings before interest, taxes, depreciation, amortization, and rent
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
49
PART III
All information required by PART III (ITEMS 10, 11, 12, AND 13) is
incorporated by reference to the Company's definitive proxy statement relating
to the 2001 Annual Meeting of Stockholders.
50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT.
(1) Financial Statements
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 2000 and 1999
Consolidated Statements of Income (Loss) for the Years ended
December 31, 2000, 1999, and 1998
Consolidated Statements of Shareholders' Equity and Comprehensive
Income (Loss) for the Years ended December 31, 2000, 1999, and
1998
Consolidated Statements of Cash Flows for the Years ended
December 31, 2000, 1999, and 1998 Notes to Consolidated Financial
Statements
(2) Financial Statement Schedules
All financial statement schedules are omitted since the required
information is either not applicable, or is not significant, or
is included in the consolidated financial statements and notes
thereto.
(3) Index to Exhibits
Exhibit Description
------- -----------
2.1 Stock Purchase Agreement dated as of March 7, 1997 among the
Registrant, The Lodge Keeper Group, Inc. ("Lodge Keeper") and the
Stockholders of Lodge Keeper. (Incorporated by reference to Exhibit
2.1 to the Registrant's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1997.)
2.2 Agreement of Merger dated as of March 11, 1997 among the Registrant,
BLM-RH, Inc., Hatfield Inns, LLC, Guy Hatfield, Dorothy Hatfield, and
Hatfield Inns Advisors, LLC. (Incorporated by reference to Appendix B
to the Registrant's Definitive Proxy Statement filed with the
Securities and Exchange Commission on June 9, 1997.)
2.3 Second Amendment to Agreement of Merger, dated as of September 17,
1997 among the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy
Hatfield, Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
(Incorporated by reference to Exhibit 2.1.1 to the Registrant's
Current Report on Form 8-K filed October 8, 1997.)
2.4* Post Closing Amendment to Agreement of Merger, dated as of May 31,
2000 among the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy
Hatfield, Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
3.1 Articles of Incorporation. (Incorporated by reference to Exhibit 2.1
to the Registrant's Registration Statement on Form 10-SB (No. 0-22132)
which became effective on November 22, 1993.)
3.2 Certificate of Amendment of Certificate of Incorporation.
(Incorporated by reference to Exhibit 3(i)(a) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1994.)
3.3 Certificate of Amendment of Certificate of Incorporation (Incorporated
by reference to Appendix A to the Registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on June 9,
1997.)
51
3.4 Certificate of Amendment of Certificate of Incorporation (Incorporated
by reference to Appendix A to the Registrant's Definitive Proxy
Statement filed with the Securities and Exchange Commission on May 5,
1998.)
3.5 By-Laws - Amended and Restated as of June 27, 1994. (Incorporated by
reference to Exhibit 3(ii) to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994.)
4.1 Form of Stock Certificate (Incorporated by reference to Exhibit 4.3 to
the Registrant's Registration Statement on Form S-8 (No. 333-58375)
filed on July 2, 1998.
4.2 Certificate of Designation, Preference and Rights of Series A
Preferred Stock of the Registrant. (Incorporated by reference to
Exhibit 3.1(c) to the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1997.)
10.1 Employment Agreement dated as of June 30, 1993 between the Company and
Douglas C. Collins. (Incorporated by reference to Exhibit 6.2 to the
Registrant's Registration Statement on Form 10-SB (No.022132) which
became effective on November 22, 1993.)
10.2 First Amendment to Douglas C. Collins Employment Agreement.
(Incorporated by reference to Exhibit 10(ii)(b) to the Registrant's
Annual Report on Form 10-KSB for the fiscal year ended December 31,
1995.)
10.3 Second Amendment to Douglas C. Collins Employment Agreement.
(Incorporated by reference to Exhibit 10.3 to the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.)
10.4 Employment Agreement dated as of June 30, 1993 between the Company and
Robert B. Lee. (Incorporated by reference to Exhibit 10(ii)(c) to the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995.)
10.5 First Amendment to Robert B. Lee Employment Agreement. (Incorporated
by reference to Exhibit 10(ii)(d) to the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1995.)
10.6 Second Amendment to Robert B. Lee Employment Agreement. (Incorporated
by reference to Exhibit 10.6 to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1999.)
10.7 Employment Agreement dated as of May 8, 1997 between the Company and
Ronald L. Devine. (Incorporated by reference to Exhibit 10.7 to the
Registrant's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.)
10.8 First Amendment to Ronald L. Devine Employment Agreement.
(Incorporated by reference to Exhibit 10.8 to the Registrant's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.)
10.9* Ronald L. Devine Termination Agreement.
10.10 1995 Stock Option Plan. (Incorporated by reference to Appendix A to
the Registrant's Definitive Proxy Statement dated April 25, 1995.)
10.11 1997 Employee Stock Option Plan (Incorporated by reference to Annex 1
to the Registrant's Definitive Proxy Statement filed with the
Securities and Exchange Commission on June 9, 1997.)
10.12 1998 Employee Stock Option Plan (Incorporated by reference to Annex 1
to the Registrant's Definitive Proxy Statement filed with the
Securities and Exchange Commission on May 5, 1998.)
10.13 1999 Employee Stock Option Plan (Incorporated by reference to Annex 1
to the Registrant's Definitive Proxy Statement filed with the
Securities and Exchange Commission on April 29, 1999.)
10.14 2000 Employee Stock Option Plan (Incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000.)
52
21* Subsidiaries of the Company
23* Accountants' Consent
*Filed herewith
(B) REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K during the last quarter
of the period covered by this report.
(C) EXHIBITS
The required exhibits as listed in Item 14(a)3 - "Index to Exhibits" herein
follows.
(D) FINANCIAL STATEMENT SCHEDULES
None. See Item 14(a)2 herein.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) BUCKHEAD AMERICA CORPORATION
----------------------------
By: (Signature and Title): /s/ Douglas C. Collins /s/ Robert B. Lee
-------------------------------- -------------------------------
Douglas C. Collins Robert B. Lee
President & Senior Vice President & Chief
Chief Executive Officer Financial & Accounting Officer
Date: March 29 , 2001 March 29 , 2001
--------------------------------- -------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: (Signature and Title) Date
/s/ Douglas C. Collins March 29, 2001
- ---------------------------------------------- --------------------
Douglas C. Collins
Director
/s/ David C. Glickman March 29, 2001
- ---------------------------------------------- ---------------------
David C. Glickman
Director
/s/ Robert B. Lee March 29, 2001
- ---------------------------------------------- --------------------
Robert B. Lee
Director
/s/ David B. Mumford March 29, 2001
- ---------------------------------------------- ---------------------
David B. Mumford
Director
/s/ William K. Stern March 29, 2001
- ---------------------------------------------- ---------------------
William K. Stern
Director
/s/ Steven A. Van Dyke March 29, 2001
- ---------------------------------------------- ---------------------
Steven A. Van Dyke
Director
1345216