SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 25(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 2, 1999
JANUS AMERICAN GROUP, INC.
(Exact name of Registrant as specified in Charter)
Delaware 0-22745 13-2572712
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2300 Corporation Blvd., N. W., Suite 232, Boca Raton, FL 33431-8596
(Address of principal executive Office) (Zip Code)
Registrant's telephone number including area code: (561-994-4800)
(Former name or Former Address, if Changed Since Last Report)
<PAGE>
This Form 8-K/A amends and supplements the Form 8-K dated February 2,
1999, filed with the Securities and Exchange Commission on February 17, 1999,
relating to the acquisition by the Company of seven hotels located in Ohio and
Florida (the "Beck II Acquisition") from affiliates of Louis S. Beck and Harry
G. Yeaggy, the Company's principal stockholders and Chairman and Vice Chairman
respectively. This Form 8-K/A contains the information referred to in Item 7 of
the Form 8-K.
Item 7. Financial Statements, Pro forma Financial Information and Exhibits.
(a) Material factors in the Beck II Acquisition and Financial Statements
Business Acquired.
The Company made the Beck II Acquisition as part of a long-term strategic
plan to increase the Company's holdings , to increase the Company's
presence in the Midwest and Florida markets, and to consolidate the
remainder of the hotel properties independently owned by Messrs. Beck and
Yeaggy within the Company. The Company acquired the properties at a price
and for consideration it believes to be advantageous to the Company in
terms of current market conditions in the hospitality industry.
(b) Pro forma Financial Information
See Index to Financial Statements and Pro forma Financial Information
below.
2
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND PRO FORMA FINANCIAL INFORMATION
Financial Statements ......................................................Page
Beck Hospitality, Inc. II
Independent Auditors' Report (Grant Thornton LLP)...........................4
Independent Auditors' Report (J.D. Cloud LLP)...............................5
Consolidated Balance Sheet at December 31, 1998 and 1997..................6-7
Consolidated Statements of Income at December 31, 1998, 1997 and 1996.......8
Consolidated Statements of Owners' Equity at December 31, 1998, 1997
and 1996..................................................................9
Consolidated Statement of Cash Flows at December 31, 1998, 1997
and 1996.................................................................10
Notes to Consolidated Financial Statements..............................11-17
Pro Forma Financial Information
Introduction to the Unaudited Pro Forma Combined Financial Statements......18
Unaudited Pro Forma Consolidated Statement of Operations
for Twelve Months Ended December 31, 1998 and 1997.......................19
Notes to Unaudited Pro Forma Consolidated Statement of Operations
for Twelve Months Ended December 31, 1998 and 1997.......................20
Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1998........21
Notes to Unaudited Pro Forma Consolidated Balance Sheet at
December 31, 1998........................................................22
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Owners
Beck Hospitality II and Subsidiaries
Cincinnati, Ohio
We have audited the accompanying consolidated balance sheet of the Beck
Hospitality II and Subsidiaries as of December 31, 1998, and the related
consolidated statements of income, owners' equity and cash flows for the year
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 1998 financial statements referred to above
present fairly, in all material respects, the financial position of Beck
Hospitality II and Subsidiaries at December 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/Grant Thornton LLP
Cincinnati, Ohio
February 17, 1999
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Owners
Beck Real Estate Operations
Cincinnati, Ohio
We have audited the accompanying combined balance sheet of the Beck Real Estate
Operations as of December 31, 1997, and the related combined statements of
income, owners' equity and cash flows for each of the two years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Beck Real Estate
Operation at December 31, 1997, and the results of the operations and their cash
flows for each of the two years in the period ended December 31, 1997.
/s/J.D. Cloud LLP
September 23, 1998 except for Note A,
as to which the date is February 2, 1999
5
<PAGE>
<TABLE>
<CAPTION>
Beck Hospitality II and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997
ASSETS 1998 1997
<S> <C> <C>
Cash $ 114,020 $ 100,022
Accounts receivable - trade 55,918 132,013
Inventory 4,085 3,801
---------- ----------
TOTAL CURRENT ASSETS 174,023 235,836
Property and equipment
Land, buildings, improvements and equipment - at cost 18,203,035 16,517,679
Less - Accumulated depreciation and amortization 7,815,949 7,043,264
----------- -----------
Net Property and Equipment 10,387,086 9,474,415
Other assets
Deferred charges and other assets 384,744 424,599
Deferred tax asset 120,000 -
Cash in escrow 1,179,474 1,206,385
---------- ----------
TOTAL OTHER ASSETS 1,684,218 1,630,984
---------- ----------
TOTAL ASSETS $12,245,327 $11,341,235
========== ==========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Beck Hospitality II and Subsidiaries
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
<S> <C> <C>
Current liabilities:
Accounts payable - trade $ 607,058 $ 550,203
Due to affiliates 2,079,893 -
Accrued expenses 519,469 576,369
Note payable - owners - 55,000
Current portion of long-term debt and capital lease obligations 1,121,281 780,607
---------- ----------
TOTAL CURRENT LIABILITIES 4,327,701 1,962,179
Long-term liabilities:
Long-term debt - net of current portion 12,559,622 13,303,478
Capital lease obligations - net of current portion 317,650 328,623
---------- ----------
TOTAL LONG-TERM LIABILITIES 12,877,272 13,632,101
Minority interest 78,117 108,170
Shareholders' equity:
Common stock, 100 shares authorized, issued and outstanding 1,000 1,000
Additional paid-in capital - 1,473,188
Retained deficit (5,038,763) 196,896
Partners' capital - 5,080,934
---------- ----------
(5,037,763) 6,752,018
Less amount advance to affiliates - (11,113,233)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY (5,037,763) (4,361,215)
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $12,245,327 $11,341,235
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE>
<TABLE>
<CAPTION>
Beck Hospitality II and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
December 31, 1998, 1997 and 1996
1998 1997 1996
<S> <C> <C> <C>
Revenue $9,479,935 $9,260,396 $9,027,803
Costs and expenses:
Hotel operating expenses 3,003,357 2,936,182 2,817,684
General and administrative expenses 3,831,589 3,781,238 3,765,373
Depreciation and amortization expense 747,958 678,628 654,531
--------- --------- ---------
Total costs and expenses 7,582,904 7,396,048 7,237,588
--------- --------- ---------
Operating income 1,897,031 1,864,348 1,790,215
Interest expense 1,361,528 1,357,792 1,340,950
--------- --------- ---------
Income before minority interest and taxes 535,503 506,556 449,265
Minority interest 26,790 33,719 58,649
--------- --------- ---------
Income before taxes 508,713 472,837 390,616
Deferred federal income tax benefit 120,000 - -
--------- --------- ---------
NET INCOME $ 628,713 $ 472,837 $ 390,616
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE>
<TABLE>
<CAPTION>
Beck Hospitality II and Subsidiaries
CONSOLIDATED STATEMENTS OF OWNERS' EQUITY
Year ended December 31, 1998, 1997 and 1996
Additional
Common Paid-in Retained Partners'
Stock Capital Earnings Capital Total
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $1,000 $ 817,273 $ 249,476 $ 4,164,901 $ 5,232,650
Capital contributions - 175,000 - - 175,000
Net income - - 52,934 337,682 390,616
----- --------- ---------- ---------- ----------
Balance, December 31, 1996 1,000 992,273 302,410 4,502,583 5,798,266
Capital Contributions - 480,915 - - 480,915
Net income (loss) - - (105,514) 578,351 472,837
----- --------- ---------- ---------- ----------
Balance, December 31, 1997 1,000 1,473,188 196,896 5,080,934 6,752,018
Net income - - 229,244 399,469 628,713
Distributions - - (267,107) (12,151,387) (12,418,494)
Corporate reorganization - (1,473,188) (5,197,796) 6,670,984 -
----- --------- ---------- ---------- ----------
Balance, December 31, 1998 $1,000 $ - $(5,038,763) $ - $(5,037,763)
===== ========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE>
<TABLE>
<CAPTION>
Beck Hospitality II and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 628,713 $ 472,837 $ 390,616
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 26,790 33,719 58,649
Depreciation and amortization 747,958 704,063 698,076
Deferred tax benefit (120,000) - -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 76,095 (35,666) 9,048
(Increase) decrease in inventory (284) 523 (1,301)
Increase in accounts payable 56,855 71,228 18,863
Increase (decrease) in accrued expenses (56,900) 206,135 (118,266)
---------- --------- ---------
Cash provided by in operating activities 1,359,227 1,452,839 1,055,685
Cash flows provided by (used in) investing activities:
Purchase of property and equipment (1,620,774) (831,290) (929,066)
Payments for deferred charges and other assets - (54,600) (30,000)
(Increase) decrease in cash in escrow 26,911 (101,871) (224,515)
---------- --------- ---------
Cash used in investing activities (1,593,863) (987,761) (1,183,581)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term debt 749,015 347,287 350,000
Repayment of long-term debt (1,218,170) (605,004) (497,502)
Decrease (increase) in due from affiliates 717,789 (175,070) 296,652
---------- --------- ---------
Cash provided by (used in) financing activities 248,634 (432,787) 149,150
Net increase in cash 13,998 32,291 21,254
Cash balance at beginning of year 100,022 67,731 46,477
---------- --------- ---------
Cash balance at end of the year $ 114,020 $ 100,022 $ 67,731
========== ========= =========
Supplemental disclosure of cash transactions:
Interest paid $ 1,364,893 $1,336,987 $1,326,126
========== ========= =========
Supplemental disclosure of non-cash transactions:
Capital lease obligations incurred $ 145,947 $ 465,239 $ 6,525
========== ========= =========
Transfer of note payable to paid in capital $ 55,000 $ 480,915 $ 175,000
========== ========= =========
Non-cash distribution of amounts due to affiliates $12,475,337 $ - $ -
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
10
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF ACCOUNTING POLICIES
The Beck Hospitality II and Subsidiaries (Company) is engaged principally
in the operation of hotel facilities in the Midwest and southeastern United
States. It is the policy of the Company to employ generally accepted
accounting principles in the preparation of its financial statements. A
summary of the significant accounting policies consistently applied in the
preparation of the accompanying Consolidated Financial Statements follows:
1. Consolidation Practices
On August 1, 1998, the Companies formerly combined to form Beck Hospitality
II and Subsidiaries and affiliates were reorganized into a parent
subsidiary structure. Prior to that time the Companies were shown as a
combined group. The transaction is being accounted for on a basis of
accounting similar to a pooling of interest. Therefore, the financial
statements have been presented as if the combination were made for all
periods presented.
As a result of that reorganization, a minority interest is recognized for
the 25% interest in Beck Group of Pompano. The financial statements have
been restated for all periods shown to reflect minority interest due to the
change in reporting entity.
The financial statements of the Beck Hospitality II and Subsidiaries and
its wholly owned subsidiaries, Beckelbe, Ltd. and Beck Group of Juno, Inc.,
(The Company) have been consolidated for reporting purposes. As a result of
the reorganization of the Companies, an advance to affiliates was
eliminated and a deemed distribution of $5,197,796 was charged to retained
earnings of Beck Hospitality II and Subsidiaries. In addition the Company
owns a 75% interest in Beck Group of Pompano Beach, Inc. All inter-company
transactions have been eliminated.
2. Accounting Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Cash
Cash includes accounts held at financial institutions with an original
maturity of three months or less.
4. Accounts Receivable
Accounts receivable are considered to be fully collectible. Accordingly, no
allowance for doubtful accounts is deemed necessary. Amounts that become
uncollectible are charged to operations when that determination is made.
11
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1998, 1997 and 1996
NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)
5. Inventory
Inventory is stated at the lower of cost or market; cost is determined
using the first-in, first-out method.
6. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are provided in amounts sufficient to relate the cost of depreciable assets
to operations principally on the straight-line method over the estimated
useful lives of the assets. The estimated useful lives are 7 to 10 years
for furniture and equipment and 30 to 50 years for buildings and
improvements. Expenditures for maintenance and repairs are expensed as
incurred.
7. Deferred Charges and Other Assets
Expenses incurred in obtaining long-term financing are amortized on the
straight-line method over the term of the loan from five to thirty years.
The hotels operate under franchise agreements, which expire at various
dates to 2009. The franchise agreements require the payment of monthly fees
for various franchise services and a payment at the initial signing of the
agreement. Expenses incurred in obtaining franchise affiliations are
amortized on the straight-line method over the term of the agreements,
which are from five years to fifteen years.
8. Advertising
Advertising production costs are expensed the first time the advertisement
is run. Media placement costs are expensed in the first month the
advertising appears. Total advertising expenses were $223,000, $396,000 and
$405,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
9. Income Taxes
Prior to August 1, 1998 the Company was comprised of Partnerships and
S-Corporations. The Company is taxed as a C-Corporation from August 1, 1998
through December 31, 1998. A deferred tax asset has been established for
the net operating loss generated during the period. No valuation reserve is
deemed necessary at this time. Temporary differences at the time of
conversion of status were not materially different.
10. Reclassification
Prior year amounts have been reclassified to conform with current year
presentation.
12
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997 and 1996
NOTE B - OPERATING ENTITIES
The Beck Hospitality II and Subsidiaries and its subsidiaries consist of
the following properties operating in the hotel business:
<TABLE>
<CAPTION>
Acquisition
Location Description Date
<S> <C> <C> <C>
Red Roof Kings Island Mason, Ohio 125 unit hotel October 1975
Cambridge Days Inn Cambridge, Ohio 103 unit hotel February 1982
Cambridge Best Western Cambridge, Ohio 95 unit hotel February 1982
Days Inn Kings Island Mason, Ohio 124 unit hotel November 1985
Days Inn Cincinnati-East Withamsville, Ohio 96 unit hotel December 1979
Holiday Inn Juno Juno Beach, Florida 60 unit hotel June 1987
Days Inn Pompano Beach Pompano Beach, 183 unit hotel June 1991
Florida
</TABLE>
NOTE C - PROPERTY AND EQUIPMENT
Total property and equipment consisted of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Land $ 2,115,978 $ 2,115,978
Land improvements 93,785 93,785
Hotels 9,546,787 8,889,373
Furniture & fixtures 5,597,930 4,813,443
Equipment and vehicles 848,555 605,100
---------- ----------
18,203,035 16,517,679
Less accumulated depreciation 7,815,949 7,043,264
---------- ----------
Net property and equipment $10,387,086 $ 9,474,415
========== ==========
</TABLE>
Deprecation expense charged to income amounted to $708,103, $678,628 and
$654,531 for the year ended in 1998, 1997 and 1996, respectively.
13
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997 and 1996
NOTE D - LONG - TERM DEBT
Long-term debt at December 31, 1998 consisted of:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Fixed rate mortgages payable in aggregate
monthly installments of approximately $150,000
including interest at 8.50-9.50%; final payment
due in April, 2017 $13,544,484 $13,969,306
Capital lease obligations payable in aggregate
monthly installments of approximately $15,000
including interest at 8%-10%; final payment due
in October, 2002 (Note F) 454,069 443,402
---------- ----------
13,998,553 14,412,708
Less current maturities 1,121,281 780,607
---------- ----------
Net long-term debt $12,877,272 $13,632,101
========== ==========
</TABLE>
Maturities of long-term debt, excluding lease obligations payable, for the
next five years are as follows:
Year ended
1999 $ 984,862
2000 607,744
2001 1,904,424
2002 358,843
2003 393,742
Thereafter 9,294,869
----------
$13,544,484
==========
14
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997 and 1996
NOTE E- LEASE INCOME
The Company received lease income from certain restaurant and office
facilities under noncancelable operating leases through August 2012. The
following is a schedule of minimum future rentals receivable at December 31,
1998:
<TABLE>
<CAPTION>
Restaurant
Year ended facilities
<S> <C>
1999 $ 63,600
2000 30,000
2001 30,000
2002 30,000
2003 33,000
Thereafter 287,000
-------
$473,600
=======
</TABLE>
Several of the leases provide for contingent rentals based upon revenue as
well as renewal options ranging from one to twenty years. Lessees are
required to pay most of the executory costs. Lease income totaled $60,700,
$69,036 and $37,000 for the year ended 1998, 1997 and 1996, respectively.
NOTE F - LEASE COMMITMENTS
The Company leases certain equipment under capital leases which expire
through 2002 and billboard advertising space under operating leases through
2000. Equipment under capital lease is depreciated over the estimated useful
life of the equipment. The assets are included in property and equipment
with depreciation included in depreciation expense.
Estimated future minimum lease payments under capital leases and under
operating leases having initial or remaining noncancellable lease terms in
excess of one year at December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Year ended Capital Capital Operating
Leases Leases
<S> <C> <C>
1999 $161,602 $159,000
2000 160,273 77,000
2001 160,273 19,000
2002 61,815 -
2003 2,982 -
------- -------
Total 546,945 $255,000
=======
Interest 92,876
-------
Present value of future
minimum lease payments $454,069
=======
</TABLE>
15
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997 and 1996
NOTE F - LEASE COMMITMENTS (continued)
Total rent expense under operating leases was $161,000, $214,000 and
$224,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
NOTE G - FINANCIAL INSTRUMENTS
The Company's financial instruments that are potentially exposed to
concentrations of credit risk consist primarily of cash and trade
receivables.
The Company maintains cash balances in several accounts throughout the
southeast and Midwestern United States, which are insured up to $100,000.
Unsecured bank balances at December 31, 1998 were approximately $1,095,000.
Cash in various escrow accounts totaling $1,179,430 in 1998 is used
primarily for repairs and replacement, taxes, and insurance.
The Company's trade receivables result from a broad customer base.
Management performs ongoing credit evaluations of its customers' financial
condition and does not believe significant credit risk exists at December
31, 1998.
NOTE H - RELATED PARTIES
The Company pays management fees to entities in which the owners of the
Company are owners or shareholders. Management fees are determined based
upon a percentage (5%) of total revenue under contracts with each property.
Management fees during the years ended 1998, 1997 and 1996 was $458,000,
$468,000 and $577,000, respectively.
NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments at December 31, 1998 consisted of cash,
accounts receivable, accounts payable and fixed rate mortgage and equipment
notes payable. In the opinion of management, cash, accounts receivable and
accounts payable were carried at values that approximated their fair values
because of their short - term maturities and mortgage and equipment notes
payable had a fair value of $14,889,898 compared to the carrying value of
$13,998,553 at December 31, 1998.
16
<PAGE>
Beck Hospitality II and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1998, 1997 and 1996
NOTE J - COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal proceedings involving
matters incidental to its business. Management believes that the resolution
of these matters will not have a material effect on the Company's business
or financial conditions.
NOTE K - SUBSEQUENT EVENTS
Effective January 1, 1999 Beck Hospitality II and Subsidiaries entered into
an agreement with Janus American Group, Inc. (Janus) to sell its operations
for $25,067,246. The principle shareholders of Janus are also the owners of
the Company.
17
<PAGE>
INTRODUCTION TO THE UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On February 2, 1999, the Company, by way of merger of Beck Hospitality,
Inc. II ("Beck II") with and into the Company, acquired seven additional hotel
properties and two management contracts. Beck II was wholly-owned by Louis S.
Beck and Harry G. Yeaggy, the Company's principal stockholders and Chairman and
Vice Chairman, respectively. The Company also assumed certain indebtedness of
another affiliate of Messrs. Beck and Yeaggy which was secured by various assets
of Beck II.
For accounting purposes the parties agreed that the effective date of
the transaction would be January 1, 1999.
The unaudited pro forma consolidated statement of operations for the
twelve months ended December 31, 1998 and December 31, 1997 is based upon (i)
the pro forma statement of operations of the Company set forth in Note 3 to the
Notes to Consolidated Financial Statements of the Company included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1998 and
(ii) the audited financial statements of Beck II filed herewith. Adjustments
have been made for (1) the elimination of management fee income and expense
attributable to Beck II properties which were managed by the Company prior to
the acquisition; (2) interest income and interest expense on the mortgage note
(the "Juno Note") secured by the property known as the Holiday Inn Express Juno
Beach; (3) the elimination of a deferred tax benefit of Beck II as a result of
the merger; and (4) an increase in preferred stock dividends attributable to the
issuance of an additional 6,336.2 shares of the Preferred Stock, Series B.
The unaudited pro forma consolidated balance sheet at December 31, 1998 is based
upon (i) the Company's audited balance sheet at December 31, 1998 included in
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1998
and (ii) the audited financial statements of Beck II filed herewith. The
acquisition entry reflects (1) the assumption of indebtedness as a result of the
merger; (2) the issuance of additional preferred stock; (3) the elimination of
the Juno Note mortgage note receivable and payable and; (4) the pay-off of
indebtedness of the shareholders of Beck II to that company.
The pro forma financial information is presented for information
purposes only and is not necessarily indicative of the financial position or
results of operations of Janus that would have occurred if the acquisition
referred to above had been completed on the date indicated, nor does it purport
to be indicative of future financial position or results of operations.
Moreover, the pro forma financial information is based on the adjustments
described in the accompanying notes, which management believes are reasonable.
18
<PAGE>
<TABLE>
<CAPTION>
JANUS AMERICAN GROUP, INC.
UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
ADJUSTED FOR BECK HOSPITALITY II ACQUISITION
YEARS ENDED ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Proforma Audited Beck Proforma
Janus American Hospitality II Adjusting Janus American
12/31/98 12/31/98 Entries 12/31/98
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Hotel revenues:
Room and related services $28,856,963 $9,069,057 $37,926,020
Food and beverage $10,685,258 $193,212 $10,878,470
Management fees $1,754,610 (1) $(461,306) $1,293,304
Other $762,202 $217,665 $979,867
---------- ---------- --------- ----------
Total revenues $42,059,033 $9,479,934 $(461,306) $51,077,661
Cost and expenses:
Direct hotel operating expenses:
Room and related services $7,250,670 $2,898,521 (1) $461,306 $9,687,885
Food and beverage $8,674,878 $104,836 $8,779,714
Selling and general expenses $2,439,982 $477,247 $2,917,229
---------- ---------- --------- -----------
Total direct hotel operating expense $18,365,530 $3,480,604 $461,306 $21,384,828
Occupancy and other operating expense $5,120,882 $1,636,262 $6,757,144
Selling, general and administrative expenses $7,656,220 $1,718,080 $9,374,300
Depreciation of property and equipment $3,394,646 $747,958 (2) $636,140 $4,778,744
Amortization of intangible assets $264,532 $264,532
---------- ---------- --------- ----------
Total costs and expenses $34,801,810 $7,582,904 $1,097,446 $42,559,548
Operating income (loss) $7,257,223 $1,897,030 ($636,140) $8,518,113
Other income (expense)
Interest income $1,137,506 (3) ($194,932) $942,574
Other income $0 $0
Interest expense $(5,340,201) $(1,361,528)(3) $194,932 $(6,506,797)
---------- ---------- --------- ----------
Income (loss) before income taxes and minority
interest $3,054,528 $535,502 ($636,140) $2,953,890
Provision (credit ) for income taxes $1,161,000 $(120,000)(4) $81,000 $1,122,000
---------- ---------- --------- ----------
Income (loss) before minority interest $1,893,528 $655,502 $(717,140) $1,831,890
Minority interest $84,992 $26,790 $111,782
---------- ---------- --------- ----------
Net income (loss) $1,808,536 $628,712 ($717,140) $1,720,108
Less preferred dividend requirements $783,891 (5) $475,215 $1,259,106
---------- ---------- --------- ----------
Net income (loss) applicable to common stock $1,024,645 $628,712 $(1,192,355) $461,002
========== ========== ========== ==========
Net income (loss) per common share-Basic 0.12 0.05
========== ==========
Net income (loss) per common share-Assuming dilution 0.12 0.05
========== ==========
Basic weighted avg. shares outstanding 8,693,545 8,693,545
========== ==========
Basic weighted avg. shares outstanding-assuming 8,693,545 8,693,545
dilution ========== ==========
Proforma Beck Proforma
Janus American Hospitality II Adjusting Janus American
12/31/97 12/31/97 Entries 12/31/97
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Hotel revenues:
Room and related services $28,295,087 $8,869,874 $37,164,961
Food and beverage $10,453,513 $174,789 $10,628,302
Management fees $921,217 (1) $(467,789) $453,428
Other $715,768 $215,733 $931,501
---------- --------- --------- ----------
Total revenues $40,385,585 $9,260,396 $(467,789) $49,178,192
Cost and expenses:
Direct hotel operating expenses:
Room and related services $7,434,533 $2,823,557 (1) $467,789 $9,790,301
Food and beverage $8,929,889 $112,637 $9,042,526
Selling and general expenses $2,316,244 $395,965 $2,712,209
---------- --------- --------- ----------
Total direct hotel operating expense $18,680,666 $3,332,159 $467,789 $21,545,036
Occupancy and other operating expense $5,106,479 $1,823,759 $6,930,238
Selling, general and administrative expenses $7,096,312 $1,561,502 $8,657,814
Depreciation of property and equipment $3,183,773 $678,628 (2) $636,140 $4,498,541
Amortization of intangible assets $268,997 $268,997
---------- --------- --------- ----------
Total costs and expenses $34,336,227 $7,396,048 $1,103,929 $41,900,626
Operating income (loss) $6,049,358 $1,864,348 $(636,140) $7,277,566
Other income (expense)
Interest income $858,423 $0 (3) $(132,071) $726,352
Other income $30,002 $0 $30,002
Interest expense $(5,387,595) $(1,357,792) (3) $132,071 $(6,613,316)
---------- --------- --------- ----------
Income (loss) before income taxes and minority
interest $1,550,188 $506,556 $(636,140) $1,420,604
Provision (credit ) for income taxes $589,000 (4) $(49,000) $540,000
---------- --------- --------- ----------
Income (loss) before minority interest $961,188 $506,556 $(587,140) $880,604
Minority interest $17,048 $20,231 $37,279
---------- --------- --------- ----------
Net income (loss) $944,140 $486,325 $(587,140) $843,325
Less preferred dividend requirements $783,891 (5) $475,215 $1,259,106
---------- --------- --------- ----------
Net income (loss) applicable to common stock $160,249 $486,325 $(1,062,355) $(415,781)
========== ========= ========== ==========
Net income (loss) per common share-Basic 0.02 -0.05
========== ==========
Net income (loss) per common share-Assuming dilution 0.02 -0.05
========== ==========
Basic weighted avg. shares outstanding 8,783,563 8,783,563
========== ==========
Basic weighted avg. shares outstanding-assuming 8,783,563 8,783,563
dilution ========== ==========
</TABLE>
19
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
The following is an explanation of the adjustments for the acquisition of
the business of Beck Hospitality, Inc. II.
1. Reflects the elimination of management fee expense and management fee
income during 1998 and 1997 attributable to the hotel properties
acquired in the transaction.
2. Reflects the effects on depreciation expenses arising from the
allocation of the fair values and estimated useful lives of the assets
acquired.
3. Reflects the elimination of interest income and interest expense
attributable to the mortgage notes secured by the property known as
the Holiday Inn Express Juno Beach. The indebtedness represented by
such note had been purchased by the Company in April, 1997.
4. Reflects the effect of an income taxes as a result of the transaction.
5. Reflects the annual dividend on the additional 6,336.2 shares of
Series B Preferred Stock issued in the transaction.
20
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET
ADJUSTED FOR BECK HOSPITALITY II ACQUISITION
YEAR ENDED DECEMBER 31, 1998
ASSETS
Audited Audited Proforma
Janus American Beck Hospitality II Adjusting Janus American
Current asset: 12/31/98 12/31/98 Entries 12/31/98
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $12,383,741 $114,020 (1) $(2,079,893) $10,417,868
Restricted cash for preferred stock of subsidiary and $802,746 $567,081 $1,369,827
real estate taxes
Accounts receivable $1,422,327 $55,918 $1,478,245
Current portion of notes receivable $322,043 (7) $(48,122) $273,921
Other current assets $239,206 $4,085 $243,291
----------- ---------- ------------
Total current assets $15,170,062 $741,104 $13,783,151
Property and equipment, net of accumulated
depreciation and amortization $74,550,300 $10,387,086 (2) $14,680,160 $99,617,546
Notes receivable $453,194 $453,194
Mortgage notes receivable from related parties $5,425,046 (7) $(2,093,627) $3,331,419
Goodwill, net of accumulated amortization $6,536,996 (3) $13,803 $6,550,799
Deferred tax asset $680,126 $120,000 (4) $(81,000) $719,126
Other assets $5,868,067 $997,137 $6,865,204
----------- ---------- -----------
Total $108,683,792 $12,245,327 $131,320,440
=========== ========== ===========
LIABILTIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $0 (5) $3,200,000 $3,200,000
Current portion of long-term debt $2,683,504 $1,121,281 (7) $(48,122) $3,756,663
Accounts payable $1,495,253 $607,058 $2,102,311
Accrued expenses $1,951,618 $519,469 $2,471,087
Due to affiliates $0 $2,079,893 (1) $(2,079,893) $0
----------- ---------- -----------
Total current liabilities $6,130,375 $4,327,701 $11,530,061
Long-term debt, net of current portion $60,582,883 $12,877,272 (7) $(2,093,627) $71,366,528
Deferred tax liabilities $0 $0 $0
----------- ---------- -----------
Total liabilities $60,582,883 $12,877,272 $71,366,528
Minority interest $1,773,961 $78,117 $1,852,078
----------- ---------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock:
Series B; par value $.01 per share;
12,000 shares authorized;
10,451.88 shares issued and outstanding $105 (6) $63 $168
Common stock, par value $.01 per share; 15,000,000
shares authorized; 11,883,220 and 11,880,867 shares
issued at December 31, 1998 and 1997 respectively $118,833 $1,000 (6) $(1,000) $118,833
Additional paid- in capital $45,738,120 (6) $6,375,137 $52,113,257
Accumulated deficit $(4,244,185) $(5,038,763) (6) $5,038,763 $(4,244,185)
Treasury stock- 3,192,128 and 3,189,132 common shares $(1,416,299) $(1,416,299)
in 1998 and 1997, at cost
----------- ---------- -----------
Total stockholders' equity $40,196,575 $(5,037,763) $46,571,775
----------- ---------- -----------
Total $108,683,792 $12,245,327 $131,320,440
=========== ========== ===========
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET AT DECEMBER 31, 1998
The following is an explanation of the adjustments for the acquisition of
the business of Beck Hospitality, Inc. II ("Beck II").
1. Cash has been reduced by $2,079,893 to reflect the payment of
liabilities to affiliates of the stockholders of Beck II.
2. Property and equipment has been increased by $14,680,160 to reflect
the fair market value of the acquired assets.
3. Reflects the recognition of goodwill in the amount by which the
consideration paid exceeds the appraised value of the assets at the
date of acquisition.
4. Reflects the elimination of a deferred tax asset which will not be
available to the Company following the merger.
5. Reflects the assumption by the Company , as part of the transaction,
of certain liabilities of affiliates of the stockholders of Beck II
which were secured by acquired assets.
6. Reflects the issuance of an additional 6,336.2 shares of Series B
Preferred Stock and the elimination of an accumulated deficit of Beck
II.
7. Reflects the elimination of the indebtedness and receivable
represented by the mortgage note secured by the property known as the
Holiday Inn Express Juno Beach. The indebtedness represented by such
note had been purchased by the Company in April, 1997.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Janus American Group, Inc.
(Registrant)
Dated: March 26, 1999 By: /s/ James E. Bishop
Name: James E. Bishop
Title: President
23
