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 JUNE 30, 1997
---------------------------------
[ ] 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
--------------
BUCKHEAD AMERICA CORPORATION
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(770) 393-2662
- --------------------------------------------------------------------------------
(Issuer's telephone number)
N/A
- --------------------------------------------------------------------------------
(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: July 31, 1997
-----------------
Common stock, par value $.01 - 1,872,447 shares outstanding
-----------------------------------------------------------
Transitional Small Business Disclosure Format (Check one):
Yes No X
--- ---
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Financial Statements
June 30, 1997 and 1996
(Unaudited)
2
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
June 30, 1997
(Unaudited)
Assets
------
Current assets:
Cash and cash equivalents, including
restricted cash of $807,193 $ 1,764,961
Short-term investments 1,504,806
Current portions of notes receivable 598,681
Other current assets 1,333,712
------------
Total current assets 5,202,160
Noncurrent portions of notes receivable 653,754
Property and equipment, at cost, net of
accumulated depreciation 23,700,624
Deferred costs 1,598,941
Long-term investments 744,802
Other assets 2,874,826
------------
Total assets $ 34,775,107
============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 2,553,183
Current portions of notes payable 1,016,951
------------
Total current liabilities 3,570,134
Noncurrent portions of notes payable 15,992,325
Other liabilities 140,735
------------
Total liabilities 19,703,194
------------
Minority interest in partnership 650,338
Shareholders' equity:
Common stock; par value $.01; 3,000,000
shares authorized; 1,924,297 shares issued
and 1,872,447 shares outstanding 19,243
Additional paid-in capital 6,978,591
Retained earnings 7,846,062
Treasury stock (51,850 shares) (422,321)
------------
Total shareholders' equity 14,421,575
------------
Total liabilities and shareholders' equity $ 34,775,107
============
See accompanying notes to consolidated condensed financial statements.
3
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Statements of Income
Six Months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
Revenues:
Hotel revenues $5,714,906 5,318,444
Interest income 676,804 513,843
Other income 1,549,355 863,829
---------- ----------
Total revenues 7,941,065 6,696,116
---------- ----------
Expenses:
Hotel operations 4,287,805 3,787,818
Depreciation and amortization 458,544 483,700
Other operating and administrative 1,447,185 881,329
Interest 613,542 779,709
---------- ----------
Total operating, administrative,
and interest expenses 6,807,076 5,932,556
---------- ----------
Income before income taxes 1,133,989 763,560
Provision for income taxes -- --
---------- ----------
Net income $1,133,989 763,560
========== ==========
Net income per common and common
equivalent share $ .61 .42
========== ==========
Weighted average number of common and
common equivalent shares used to
calculate net income per share 1,854,790 1,810,855
========= =========
See accompanying notes to consolidated condensed financial statements.
4
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Statements of Income
Three Months ended June 30, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
Revenues:
Hotel revenues $3,426,734 2,437,680
Interest income 114,225 303,817
Other income 594,678 507,368
---------- ----------
Total revenues 4,135,637 3,248,865
---------- ----------
Expenses:
Hotel operations 2,655,545 1,897,639
Depreciation and amortization 268,244 246,600
Other operating and administrative 835,607 446,476
Interest 356,494 397,695
---------- ----------
Total operating, administrative,
and interest expenses 4,115,890 2,988,410
---------- ----------
Income before income taxes 19,747 260,455
Provision for income taxes -- --
---------- ----------
Net income $ 19,747 260,455
========== ==========
Net income per common and common
equivalent share $ .01 .14
========== ==========
Weighted average number of common and
common equivalent shares used to
calculate net income per share 1,887,585 1,818,497
========== ==========
See accompanying notes to consolidated condensed financial statements.
5
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
Cash flows from operating activities:
Net income $ 1,133,989 763,560
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 458,544 483,700
Gain on note sale (800,000) --
Other, net (912,909) (485,743)
----------- -----------
Net cash provided (used) by
operating activities (120,376) 761,517
----------- -----------
Cash flows from investing activities:
Note receivable principal receipts 910,958 2,385,647
Originations of notes receivable (320,000) (282,389)
Hotel assets acquired -- (2,965,000)
Capital expenditures (643,942) (394,161)
Other, net 331,088 262,880
----------- -----------
Net cash provided (used) by
investing activities 278,104 (993,023)
----------- -----------
Cash flows from financing activities:
Repayments of notes payable (194,437) (2,383,342)
Additional borrowings -- 2,330,000
Other, net -- 34,400
----------- -----------
Net cash provided (used) by
financing activities (194,437) (18,942)
----------- -----------
Net increase (decrease) in cash and
cash equivalents (36,709) (250,448)
Cash and cash equivalents at beginning
of period 1,801,670 3,172,661
----------- -----------
Cash and cash equivalents at end of period $ 1,764,961 2,922,213
=========== ===========
(Continued)
See accompanying notes to consolidated condensed financial statements.
6
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows - Continued
Six Months Ended June 30, 1997 and 1996
(Unaudited)
In May 1997, the Company recorded the following partial cash activity relating
to the acquisition of The Lodge Keeper Group, Inc.:
Costs:
Cash $ 825,000
Common stock issued, net
of treasury stock acquired 658,580
Debt assumed 4,784,754
-----------
$ 6,268,334
===========
Allocated to:
Property and equipment $ 4,724,329
Other assets 2,893,021
Working capital deficit (1,349,016)
-----------
$ 6,268,334
===========
7
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
June 30, 1997 and 1996
(Unaudited)
(1) Basis of Presentation
---------------------
The accompanying unaudited 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) Business Acquisition
--------------------
On May 8, 1997, the Company completed its acquisition of The Lodge
Keeper Group, Inc. of Prospect, Ohio ("Lodge Keeper"). The purchase
price totaled approximately $6.3 million consisting primarily of
cash of $825,000, 106,320 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 has been accounted for
using the purchase method and Lodgekeeper's results of operations
are included in the Company's financial statements from the
acquisition date.
The following pro forma financial information presents total
revenue, net income, and net income per share for the six months
ended June 30, 1997 and 1996 as if the acquisition had occurred at
the beginning of such periods:
Six Months ended June 30,
Pro forma: 1997 1996
--------------------- ---------- ----------
Total revenue $ 10,481,825 11,355,086
============ ==========
Net income $ 1,353,185 412,322
============ =======
Net income per common and
common equivalent share $ .70 .22
=== ===
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION.
- -------------------------------------------------------
1996
- ----
During the second quarter of 1996, the Company invested approximately $250,000
in a joint venture to build a Country Hearth Inn in Mason, Ohio. The property
opened in May 1997. In a separate transaction, the Company made a $170,000 loan
to a partnership which, in turn, executed a license agreement for a Country
Hearth Inn in Canton Township, Michigan. The loan proceeds were used for hotel
renovations and the Company also has an option to acquire up to a 50% equity
interest in the partnership.
Also during the second quarter of 1996, the Company collected $250,000 on a note
receivable pledged to Trilon International, Inc. ("Trilon"). Those proceeds
along with other collections reduced the net obligation to Trilon to
approximately $1 million. The Trilon obligation was fully satisfied in the
fourth quarter of 1996.
One of the last remaining "Old Buckhead" claims was resolved in April 1996. The
settlement released approximately $300,000 of restricted funds to the Company.
1997
- ----
On May 8, 1997, the Company completed its acquisition of The Lodge Keeper Group,
Inc. of Prospect, Ohio ("Lodge Keeper"). The purchase price totaled
approximately $6.3 million consisting primarily of cash of $825,000, 106,320
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.
Approximately $4.7 million of the purchase price was allocated to property and
equipment and approximately $2.5 million to leasehold interests. The Company
also assumed a working capital deficit of approximately $1.3 million.
Lodge Keeper will continue to manage the 24 hotels it previously managed in
addition to managing the five properties previously managed by the Company and
will manage properties to be acquired by the Company such as the previously
reported Hatfield Inns.
At its June 26, 1997 annual meeting of shareholders, the Company received
authorization to issue up to 200,000 shares of preferred stock. The Company
expects to issue $3 million of preferred stock in connection with the previously
reported Hatfield Inn acquisition. The transaction is expected to close in the
third quarter of 1997 although management can provide no assurance that the
transaction will close at that time or at all.
9
RESULTS OF OPERATIONS
- ---------------------
Periods ended June 30, 1997 and 1996
- ------------------------------------
Hotel revenues amounted to $3,426,734 and $5,714,906 for the three month and six
month periods ended June 30, 1997, respectively, as opposed to $2,437,680 and
$5,318,444 during the same periods in 1996. Hotel operating profits for the 1997
three and six month periods amounted to $771,189 and $1,427,101, respectively,
versus $540,041 and $1,530,626 in 1996. Such changes are attributable to the
acquisition of Lodge Keeper in May 1997 and the sale of the Company's Miami
hotel in December 1996. Also, revenue increases resulted from the Company's 1996
acquisitions of hotels in Atlanta and Dalton, Georgia.
The properties presently owned by the Company are subject to a significant
amount of seasonal fluctuation. Most of the properties are expected to be
profitable during the third quarter and will probably not be profitable during
the fourth quarter. On an annual basis, all properties are expected to satisfy
their debt and other cash obligations in addition to providing the Company with
management and/or franchise fees.
Interest income continues to decline as a result of decreases in the note
receivable portfolio and in funds available for investment. As previously
stated, management intends to shift financial resources to other assets, such as
the hotel acquisitions previously discussed. The first quarter of 1997 includes
approximately $450,000 resulting from the call of IRB's the Company previously
owned.
Other income in the second quarter of 1997 and 1996 includes approximately
$250,000 and $350,000, respectively, relating to favorable settlements of "Old
Buckhead" claims. Further such gains are not expected. Both the 1997 and 1996
second quarters include approximately $130,000 of franchise fees, excluding fees
from Company owned properties which are eliminated. Most of the resulting 1997
increase is attributable to the Lodge Keeper acquisition and miscellaneous
recoveries.
Other operating and administrative expenses in the second quarter of 1997
increased $389,131 versus the same period in 1996. Most of this increase (67%)
resulted from the acquisition of Lodge Keeper in May 1997. Another 28% of the
increase is attributable to personnel additions to the Company's Country Hearth
Inn franchising operations.
Depreciation and interest expense in the first half of 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 half of 1996 amounted to
$113,907. Interest expense in future periods will increase as a result of the
openings of the Atlanta and Dalton hotels and as a result of the Lodge Keeper
acquistion. Most of the Company's debt obligations are fixed rate, thus the
Company is not susceptible to a large amount of rate risk.
10
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On May 8, 1997, the Registrant issued 106,320 unregistered shares of its $.01
par value common stock to accredited investors. Such shares were issued as
partial consideration for the Registrant's acquisition of The Lodge Keeper
Group, Inc. ("Lodge Keeper"). The recipients of the shares were the former
shareholders of Lodge Keeper and the consideration received by the Registrant
was estimated to have a fair market value equal to the fair market value of the
shares issued.
The exemption from registration was pursuant to Section 4(2) of the Securities
Act of 1933, as amended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 26, 1997. The
purpose of the meeting was to consider and vote upon the following matters:
1. To elect a Board of Directors consisting of five persons to
serve until the next Annual Meeting of Shareholders.
2. To consider a proposal to amend the Company's Certificate of
Incorporation to authorize the issuance of up to 200,000 shares
of Preferred Stock.
3. To consider a proposal to approve the Company's 1997 Employee
Stock Option Plan.
4. To transact such other business as may have properly come before
the meeting.
Three of the Company's incumbent directors (Douglas C. Collins, Robert M.
Miller, and William K. Stern) were nominated for re-election. Additionally,
Robert B. Lee and Steven A. Van Dyke were nominated. Each of the nominees was
elected as follows:
Votes For Votes Withheld
--------- --------------
Douglas C. Collins 1,419,475 2,061
Robert M. Miller 1,418,207 3,329
William K. Stern 1,418,707 2,829
Robert B. Lee 1,419,475 2,061
Steven A. Van Dyke 1,418,207 3,329
11
The proposal to amend the Company's Certificate of Incorporation to authorize
the issuance of up to 200,000 shares of Preferred Stock was approved as follows:
Votes
-----
For 981,919
Against 73,359
Abstentions 5,064
Broker non-votes 361,194
The proposal to approve the Company's 1997 Employee Stock Option Plan was
approved as follows:
Votes
-----
For 1,410,273
Against 5,962
Abstentions 5,301
No other matters came before the meeting.
12
Item 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
-----------------
Exhibit Description
------- -----------
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.)
10(ii)(g) 1997 Employee Stock Option Plan (Previously filed as
Annex 1 to the Registrant's Definitive Proxy Statement
filed with the Securities and Exchange Commission on
June 9, 1997 and incorporated herein by reference.)
27 Financial Data Schedule (Electronic filing only)
(b) Reports on Form 8-K
-------------------
On May 22, 1997, the Registrant filed a report on Form 8-K which
reported the acquisition of The Lodge Keeper Group, Inc.
On April 25, May 29, and June 9, 1997, the Registrant filed
reports on Form 8-K for the purpose of filing consents of
independent auditors regarding opinions relating to financial
statements of Hatfield Inns, LLC.
13
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
- ----------------------------
(Registrant)
Date: August 13, 1997 /s/Douglas C. Collins
-------------------------------------------
Douglas C. Collins
President and Chief Executive Officer
Date: August 13, 1997 /s/Robert B. Lee
-------------------------------------------
Robert B. Lee
Vice President and Chief Financial Officer
14