U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-22132
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BUCKHEAD AMERICA CORPORATION
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(Exact name of small business issuer as
specified in its charter)
DELAWARE 58-2023732
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization
4243 DUNWOODY CLUB DRIVE, SUITE 200, ATLANTA, GEORGIA 30350
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(Address of principal executive offices)
(770) 393-2662
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: April 30, 1997
Common stock, par value $.01 - 1,771,127 shares outstanding
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Transitional Small Business Disclosure Format (Check one):
Yes No X
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1
PART I - FINANCIAL INFORMATION
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
March 31, 1997 and 1996
(Unaudited)
2
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 1997
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents, including
restricted cash of $284,637 $ 1,878,401
Short-term investments 2,649,005
Current portions of notes receivable 731,143
Other current assets 666,317
------------
Total current assets 5,924,866
Noncurrent portions of notes receivable 398,703
Property and equipment, at cost, net of
accumulated depreciation 19,084,452
Other assets 2,103,557
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Total assets $ 27,511,578
============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 751,394
Current portions of notes payable 330,271
------------
Total current liabilities 1,081,665
Noncurrent portions of notes payable 12,019,991
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Total liabilities 13,101,656
------------
Minority interest in partnership 666,674
Shareholders' equity:
Common stock; par value $.01; 3,000,000
shares authorized; 1,817,977 shares issued
and 1,771,127 shares outstanding 18,180
Additional paid-in capital 6,288,574
Retained earnings 7,826,315
Treasury stock (46,850 shares) (389,821)
------------
Total shareholders' equity 13,743,248
------------
Total liabilities and shareholders' equity $ 27,511,578
============
See accompanying notes to condensed consolidated financial statements.
3
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
Three Months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Revenues:
Hotel revenues $2,288,172 2,880,764
Interest income:
Notes receivable 19,555 88,570
Investments 543,024 121,456
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Total interest income 562,579 210,026
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Other income 954,677 356,461
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Total revenues 3,805,428 3,447,251
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Expenses:
Hotel operations 1,632,260 1,890,179
Depreciation and amortization 190,300 237,100
Other operating and administrative 611,578 434,853
Interest 257,048 382,014
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Total operating, administrative,
and interest expenses 2,691,186 2,944,146
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Income before income taxes 1,114,242 503,105
Provision for income taxes -- --
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Net income $1,114,242 503,105
========== ==========
Net income per common and common
equivalent share $ .61 .28
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Weighted average number of common
and common equivalent shares used
to calculate net income per share 1,821,994 1,803,212
========== ==========
See accompanying notes to condensed consolidated financial statements.
4
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996
(Unaudited)
1997 1996
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Cash flows from operating activities:
Net income $ 1,114,242 503,105
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 190,300 237,100
Gain on note sale (800,000) --
Other, net (214,387) (225,742)
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Net cash provided by
operating activities 290,155 514,463
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Cash flows from investing activities:
Note receivable principal receipts 852,660 1,844,645
Originations of notes receivable (250,000) --
Hotel assets acquired -- (2,965,000)
Capital expenditures (513,855) (279,448)
Other, net (233,532) (37,504)
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Net cash used by
investing activities (144,727) (1,437,307)
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Cash flows from financing activities:
Repayments of notes payable (68,697) (1,781,050)
Additional borrowings -- 2,330,000
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Net cash provided (used) by
financing activities (68,697) 548,950
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Net increase (decrease) in cash and
cash equivalents 76,731 (373,894)
Cash and cash equivalents at beginning
of period 1,801,670 3,172,661
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Cash and cash equivalents at end of period $ 1,878,401 2,798,767
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1997 and 1996
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial
statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for
interim periods are not necessarily indicative of the results that
may be expected for a full year or any other interim period. For
further information, see the consolidated financial statements
included in the Company's Form 10-KSB for the year ended December
31, 1996.
(2) Subsequent Event
----------------
On May 8, 1997, the Company completed its acquisition of Lodgekeeper
Group Inc. of Prospect, Ohio ("Lodgekeeper"). The purchase price
totaled approximately $6.5 million consisting primarily of cash of
$825,000, approximately 106,000 shares of common stock of the
Company, and the assumption of approximately $4.8 million of debt.
Lodgekeeper operates 18 hotels under long-term leases, holds
management contracts on five Country Hearth Inn hotels and owns one
independent hotel, among other assets. The acquisition will be
accounted for using the purchase method and Lodgekeeper's results of
operations will be included in the Company's subsequent financial
statements from the acquisition date.
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Item 2. Management's Discussion and Analysis.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION.
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1996
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The most significant event affecting the Company's financial condition during
the first quarter of 1996 was the acquisition of an 82-room hotel in Atlanta for
approximately $3 million. The acquisition was funded by $600,000 cash, issuance
of a $230,000 interest free short-term note, and a seller provided $2.1 million
(9.5%) first mortgage.
During 1996 and 1997, the Company spent approximately $800,000 in renovations
and refurbishments in converting the Atlanta hotel to a Country Hearth Inn.
Approximately half of these costs were financed through lease agreements.
Other first quarter 1996 events included the collection of $1.1 million on a
first mortgage note receivable which had been pledged to Trilon International.
These funds reduced the Company's net obligation to Trilon to approximately $1.5
million. The Trilon obligation was fully satisfied in the fourth quarter of
1996.
The Company also collected in full on a $730,000 short-term note related to the
development, conversion, and sale of a hotel property in Lake Park, Georgia. The
Company recognized a $130,000 first quarter profit as a result of converting
this property to a Country Hearth Inn.
The Company reduced its Orlando IRB obligation $400,000 using funds generated by
operations of the Orlando Country Hearth Inn. Such obligation was refinanced in
November 1996.
1997
- ----
The Company completed the renovations of the Atlanta, Georgia Country Hearth Inn
in January 1997. The Atlanta hotel was acquired in March 1996 (see above). The
Company completed the renovations of the Dalton, Georgia Country Hearth Inn in
February 1997 and also completed certain enhancements to the Orlando, Florida
Country Hearth Inn which were required under its debt obligation. Capital
expenditures on these three hotels during the first quarter of 1997 aggregated
approximately $500,000 and were funded from available cash and restricted funds.
The Company received $800,000 cash from the sale of a mortgage note in February
1997. The Company also received approximately $1.6 million cash from its
investment in IRB's which were called in February 1997. The majority of these
funds were reinvested in short-term government securities.
In March 1997, the Company announced that it had entered into two separate
agreements for the acquisition of hotels, hotel management contracts, and a
hotel management business. One agreement provides for the purchase of eight
Hatfield Inns located in Kentucky and Missouri (the "Hatfield Agreement"). The
Hatfield Agreement, if consummated, would require the assumption of
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approximately $7 million in debt and the issuance of $3 million of 10%
cumulative preferred convertible stock of the Company. The Company intends to
convert the properties to Country Hearth Inns; conversion costs are not expected
to be significant. The operations of the hotels are expected to service the debt
and the preferred stock requirements. The Hatfield Agreement is subject to
significant due diligence and other contingencies. The authorization to issue
preferred shares of the Company is subject to shareholder approval. Management
of the Company provides no assurances that the transaction will be completed or
that, if completed, the final terms will be the same as described above.
The second agreement was for the acquisition of Lodgekeeper Group Inc.
("Lodgekeeper"), a closely held concern that manages 24 hotels in Ohio, Indiana,
and Michigan. Lodgekeeper operates 18 hotels under long-term leases, holds
management contracts on five Country Hearth Inns, and owns one independent
hotel, among other assets. The transaction was completed in May 1997 (see note 2
to the accompanying condensed consolidated financial statements).
In February 1997, the Company completed the sale of its investment in Days Inns
Mortgage Trust ("DIMT"). The Company collected $100,000 from the sale; the gain
for financial reporting purposes had been recognized in 1996. The Company had
significant tax purpose net operating loss carryforwards associated with its
investment in DIMT. The Company had not recognized the benefits from these tax
purpose carryforwards since they were offset by tax purpose gains which would be
realized upon the dissolution of DIMT (i.e. these were timing differences
between financial and tax reporting). The Company continues to have unrecognized
net deferred tax assets of approximately $4 million which will be realized if
and to the extent the Company sustains continued profitable operations.
RESULTS OF OPERATIONS
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First Quarter of 1997 vs. First Quarter of 1996
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Hotel revenues and operating profits before interest and depreciation in the
first quarter of 1997 were reduced as a result of the fourth quarter 1996 sale
of the Company's Miami hotel. The Miami hotel contributed approximately $160,000
of net income to the Company's 1996 first quarter, but lost approximately
$80,000 during the remainder of 1996.
Excluding the impact of the Miami hotel, hotel revenues and operating profits
before interest and depreciation increased during the first quarter of 1997. The
revenue increase was primarily attributable to the acquisitions of the Atlanta
and Dalton hotels. Operating profits from the Orlando and Daytona Florida hotels
were comparable to 1996, and were comparatively negligible from the Atlanta and
Dalton hotels which just completed renovations. Operating profits from the
Company's Texas hotels tripled in the first quarter of 1997 vs. 1996 as they
completed their first full year as Country Hearth Inns.
Note receivable interest income continued to decline as a result of decreases in
the note receivable portfolio. As previously stated, management intends to shift
8
financial resources to other assets, such as the hotel acquisitions previously
discussed. The first quarter of 1997 included investment income of approximately
$450,000 as a result of the IRB's which were called. As previously stated, these
funds have been reinvested.
Other income in 1996 included the $130,000 gain from the sale of the Lake Park
hotel and approximately $110,000 of income from changes in estimates of allowed
amounts of "Old Buckhead" claims. Further gains from these sources are not
expected. Other income in 1997 included the $800,000 note sale gain previously
discussed. Other income also included Country Hearth Inn franchise fees of
approximately $108,000 and $92,000 in the first quarters of 1997 and 1996,
respectively.
Depreciation and interest expense in 1997 were reduced as a result of the
previously discussed Miami hotel sale. Interest expense on each individual debt
obligation generally decreased as the principal balances were reduced. Interest
expense associated with the Orlando hotel increased as a result of the increased
principal balance resulting from its November 1996 refinancing. Proceeds from
the refinancing were used to pay off the Trilon obligation. Trilon interest
expense in the first quarter of 1996 amounted to $68,000. Interest expense in
future periods will increase as a result of the openings of the Atlanta and
Dalton hotels. Most of the Company's debt obligations are fixed rate, thus the
Company is not susceptible to a large amount of rate risk.
Other operating and administrative expenses increased approximately $175,000 in
the first quarter 1997 vs. 1996. These increases result primarily from personnel
additions associated with Country Hearth Inn franchising activities and
increased sales and marketing efforts. The Company has continued to invest
portions of its other income into the expansion of the Country Hearth Inn hotel
chain. Management expects to recover such investments from future franchising
income.
The Company's financial condition and results of operations in future
periods will be significantly impacted by the Lodgekeeper acquisition and the
Hatfield acquisition, if completed. The Company expects to report historical and
pro forma financial information relating to its acquisitions, as required, in
subsequent filings with the Commission.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit Description
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2.1* Stock Purchase Agreement dated as of March 7, 1997 amoug the
Registrant, The Lodge Keeper Group, Inc. ("LodgeKeeper") and
the Stockholders of LodgeKeeper.
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 herein by reference to Appendix B of the
Registrant's Preliminary Proxy Statement filed with the
Securities and Exchange Commission on April 25, 1997.)
3(i) Articles of Incorporation (Previously filed as Exhibit 3(i)
to the Registrant's Registration Statement on Form 10-SB
which became effective on November 22, 1993 and incorporated
herein by reference.)
3(i)(a) Certificate of Amendment of Certificate of Incorporation
(Previously filed as Exhibit 3(i)(a) to the Registrant's
December 31, 1994 Form 10-KSB and incorporated herein by
reference.)
3(ii) By-Laws - Amended and Restated as of June 27, 1994
(Previously filed as Exhibit 3(ii) to the Registrant's
December 31, 1994 Form 10-KSB and incorporated herein by
reference.)
27 Financial Data Schedule
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* In accordance with Item 601(b)(2) of Regulation S-K, the schedules have
been omitted and the Company undertakes to furnish supplementally a copy of any
omitted schedule to the commission upon request.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K during the
quarter for which this report is filed.
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Buckhead America Corporation
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(Registrant)
Date: May 14, 1997 /s/ Douglas C. Collins
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Douglas C. Collins
President and Chief Executive Officer
Date: May 14, 1997 /s/ Robert B. Lee
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Robert B. Lee
Senior Vice President and
Chief Financial and Accounting Officer
11