<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- ---
Act of 1934
For the quarterly period ended December 31, 1994 or
___ 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 1-9822
BUFFTON CORPORATION
---------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-1732794
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107
-----------------------------------------------------
(Address and zip code of principal executive offices)
(817) 332-4761
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
___________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
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.
Yes X No ___
---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding at:
Class February 7, 1995
- ---------------------------- --------------------------------
Common stock, $.05 par value 5,458,022
1
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BUFFTON CORPORATION
-------------------
Index
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information............................................ 3
Item 1 - Financial Statements............................................. 3
Consolidated Condensed Balance Sheets December 31, 1994 (Unaudited)
and September 30, 1994.................................................. 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended December 31, 1994 and 1993........................... 4
Consolidated Condensed Statements of Cash Flow (Unaudited)
Three Months Ended December 31, 1994 and 1993........................... 5
Supplemental Disclosures of Cash Flow Information (Unaudited)............. 6
Notes to Consolidated Condensed Financial Statements (Unaudited).......... 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................... 12
Part II - Other Information............................................... 17
Signatures................................................................ 18
</TABLE>
2
<PAGE>
Item 1. - Financial Statements
BUFFTON CORPORATION
Consolidated Condensed Balance Sheets
-------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
(Unaudited)
(In thousands)
<S> <C> <C>
Assets
------
Current assets:
Cash.............................................. $ 3,158 $ 3,196
Accounts receivable, net of allowance for
doubtful accounts of $93,000 and $150,000,
respectively................................... 1,813 3,541
Inventories....................................... 1,104 4,044
Prepaid and other current assets.................. 272 344
Investment in discontinued operation.............. 636 -
------- -------
Total current assets........................... 6,983 11,125
Property, plant and equipment, at cost:
Land, building and improvements................... 3,698 6,097
Machinery, equipment and tooling.................. 1,538 8,442
Less: Accumulated depreciation and amortization.. (2,057) (6,457)
------- -------
Net property, plant and equipment............... 3,179 8,082
Patents, net of accumulated amortization of
$1,207,000 and $1,206,000, respectively......... 1,768 1,818
Goodwill, net of amortization of $374,000 and
$302,000........................................ 3,739 3,811
Other assets, net.................................. 40 234
------- -------
$15,709 $25,070
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt................. $ 74 $ 518
Accounts payable.................................. 700 1,610
Accrued liabilities............................... 1,358 1,594
Income tax payable................................ 249 254
------- -------
Total current liabilities........................ 2,381 3,976
Long-term debt..................................... 918 5,507
Deferred income taxes.............................. 183 330
Stockholders' equity:
Preferred stock $.01 par value; 5,000,000 shares
authorized; no shares issued and outstanding... - -
Common stock $.05 par value; 30,000,000 shares
authorized; outstanding shares 5,278,022....... 264 264
Additional paid-in capital........................ 12,020 12,020
Retained earnings (deficit)....................... (57) 2,973
------- -------
Total stockholders' equity....................... 12,227 15,257
------- -------
$15,709 $25,070
======= =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial
Statements.
3
<PAGE>
BUFFTON CORPORATION
Consolidated Condensed Statements of Operations (Unaudited)
-----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended December 31,
-------------------------
1994 1993
------- -------
(In thousands, except per
share amounts)
<S> <C> <C>
Net revenues...................................... $ 4,117 $10,021
Costs and expenses:
Cost of goods sold (exclusive of depreciation). 1,276 6,953
Selling, general and administrative............ 2,438 2,155
Depreciation and amortization.................. 251 321
Interest....................................... 37 114
------- -------
Total costs and expenses...................... 4,002 9,543
------- -------
Income from continuing operations before
income taxes................................... 115 478
Income tax provision............................ 43 142
------- -------
Income from continuing operations............... 72 336
Discontinued operation:
Loss from operations, net of income tax benefit
of $107,000 and $41,000, respectively......... (199) (99)
Loss on disposal, net of income tax benefit
of $165,000................................... (2,903) -
------- -------
Loss from discontinued operation............... (3,102) (99)
------- -------
Net income (loss)............................... $(3,030) $ 237
======= =======
Income (loss) per average common share:
Continuing operations.......................... $ .01 $ .07
Discontinued operation......................... (.59) (.02)
------- -------
Net income (loss).............................. $ (.58) $ .05
======= =======
Weighted average common shares outstanding...... 5,278 4,678
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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BUFFTON CORPORATION
-------------------
Consolidated Condensed Statements of Cash Flow (Unaudited)
----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended December 31,
----------------------
1994 1993
------- -----
(In thousands)
<S> <C> <C>
Net cash provided by operating activities......... $ 207 $ 90
Cash flows from investing activities:
Additions to property, plant and equipment...... (210) (182)
Construction in progress, primarily tooling..... (204) (197)
Reductions (increase) in other assets........... 37 (246)
------ -----
Net cash used in investing activities............. (377) (625)
Cash flows from financing activities:
Additions to long-term debt..................... 132 602
Repayments of long-term debt.................... - (174)
------ -----
Net cash provided by financing activities......... 132 428
------ -----
Net decrease in cash.............................. (38) (107)
Cash at beginning of period....................... 3,196 450
------ -----
Cash at end of period............................. $3,158 343
====== =====
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
5
<PAGE>
Supplemental Disclosures of Cash Flow Information
-------------------------------------------------
Supplemental schedule of cash payments:
<TABLE>
<CAPTION>
Three Months
Ended December 31,
------------------
1994 1993
---- ----
(In thousands)
<S> <C> <C>
Cash paid for:
Interest.............................................. $37 $114
Income taxes.......................................... - 10
</TABLE>
6
<PAGE>
BUFFTON CORPORATION
-------------------
Notes to Consolidated Condensed Financial Statements (Unaudited)
----------------------------------------------------------------
Note A
------
In the opinion of management, the accompanying consolidated condensed
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position of
Buffton Corporation (the Company), as of December 31, 1994, and the results
of its operations and its cash flows for the three month period ended
December 31, 1994 and 1993.
The accounting policies followed by the Company are set forth in Note 1
to the Company's financial statements in the 1994 Buffton Corporation Annual
Report on Form 10-K.
Note B
------
The results of operations for the three month period ended December 31,
1994 are not necessarily indicative of the results to be expected for the
full year.
Note C
------
Net income (loss) per share has been computed on the basis of the
weighted average number of common shares outstanding.
Note D
------
Inventories are as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
(In thousands)
<S> <C> <C>
Raw materials $ 716 $1,741
Work in process 142 282
Finished goods 246 2,021
------ ------
$1,104 $4,044
====== ======
</TABLE>
Note E
------
Effective January 1, 1994, the Company entered into an agreement with
ECA to acquire the New Orleans operations of ECA in exchange for the
Company's note receivable from and
7
<PAGE>
equity interest in ECA approximating $2,641,000 as well as 600,000 shares of
its common stock and $159,000 in cash. The market value of the 600,000 shares
was $824,000 at the date of the acquisition. The agreement provided for the
transfer of 235,000 shares of the 600,000 shares of the Company's common
stock to be issued to the owners and certain creditors of ECA and its
subsidiaries.
The assets acquired consisted of cash, inventory, leasehold interests
and improvements, sound, light, video and bar equipment and certain other
assets, including prepaids. Liabilities assumed by a subsidiary of the
Company consisted of trade accounts payable and other accrued liabilities in
ordinary course of business and debt of approximately $815,000 outstanding at
January 1, 1994.
In addition to the above described transactions with ECA, the Company
had a note receivable from ECA at January 1, 1994 aggregating $400,000 and
advances of $320,000. The Company also had an option to purchase the stock
of American Food Classics, Inc. (AFC) from ECA at the greater of fair market
value, to be determined by an independent appraisal, or $300,000. The
Company exercised its option January 1, 1994 and exchanged its note
receivable from and advances to ECA for the stock of AFC. The note
receivable and advances approximated the fair market value of the AFC stock
at the date of exchange.
The 1994 acquisitions were accounted for under purchase accounting and
the results of operations were consolidated beginning with the effective
dates. Excess of purchase price over fair value of net tangible assets
acquired was $4,113,000 at effective date of the acquisitions and is included
in Goodwill on the Consolidated Condensed Balance Sheet. Unaudited pro forma
results of operations for the three months ended December 31, 1993 as if the
acquisitions had occurred at the beginning of the period, are as follows (In
thousands, except per share amounts):
<TABLE>
<S> <C>
Revenues $11,484
Income from continuing operations 275
Income from continuing operations
per average common share $ .06
</TABLE>
The New Orleans operations and AFC are collectively referred to as the
"Hospitality Division".
Effective February 28, 1994, Contex Electronics, Inc., a subsidiary of
the Company, sold all of the operating assets and liabilities of MoldCon and
Tri-Tec, two of its wholly owned subsidiaries. The sales price for the
assets was $9,277,000 in cash plus the assumption of certain liabilities by
the buyer. The net proceeds from the disposition were used to reduce bank
debt approximately $5,000,000 and for short-term investments.
The assets sold consisted primarily of trade accounts receivable,
inventory, machinery, equipment and furniture and fixtures. Liabilities
assumed by the Buyer consisted of trade accounts payable and other accrued
liabilities in the ordinary course of business. The assets and
8
<PAGE>
liabilities related to the manufacture of molded internal and external cable
assemblies and internal wiring harnesses.
After deducting applicable selling expenses, the Company reported a
pretax gain of $1,050,000 on the sale during the quarter ended March 31,
1994. The results of operations, relative to the businesses sold are
included in the Company's statements of income for the three months ended
December 31, 1993. Revenue and operating profit was $5,538,000 and $224,000,
respectively, for the three month period ended December 31, 1993.
By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operation of Flo
Control, Inc. (Flo Control) headquartered in Burbank, California. The
purchaser of these operations was Russell J. Sarno, President of Flo Control
and a board member of the Company. Mr. Sarno purchased virtually all of the
assets of Flo Control for $3,100,000 in cash and assumed $800,000 of Flo
Control's liabilities. As a condition of the sale, Mr. Sarno agreed to
purchase Flo Control's 95% ownership interest in the Florida Realty Joint
Venture for $150,000 in cash. In connection with these transactions, Flo
Control's secondary containment product line was sold to Mr. Pat Hopkins for
a $500,000 note. As a result of the above transactions, the Company
recognized a loss on disposal of $2,903,000, net of income tax benefit, in
its first quarter ended December 31, 1994. The sale of Flo Control was
accounted for as a discontinued operation. Investment in discontinued
operation on the Consolidated Condensed Balance Sheet represents sales
proceeds of $3,750,000 reduced by bank debt and other liabilities of
$3,114,000.
Approximately $2.4 million of the cash proceeds from the sale were used
to reduce the Company's outstanding debt of Flo Control. As a result of the
sale of Flo Control's 95% interest in the Florida Realty Joint Venture, the
$2.3 million debt of the Florida Realty Joint Venture, previously
consolidated in the Company's Balance Sheet, was eliminated as well as the
monthly expense of the Flo Control lease.
The assets sold consisted primarily of trade accounts receivable,
inventory, machinery, equipment and furniture and fixtures. Liabilities
assumed by the buyer consisted of trade accounts payable and other accrued
liabilities in the ordinary course of business. The assets and liabilities
related to the manufacture of polyvinyl chloride pipe fittings.
Note F
------
During March 1992, the United States Environmental Protection Agency
(EPA), issued a Record of Decision (ROD) with respect to the Company's
Superfund Site in Vestal, New York. An Administrative Order for Remedial
Design and Remedial Action was issued in October 1, 1992. The ROD requires
the Company to construct a water treatment facility at the site and to pump
contaminated ground water from bedrock and overburden extraction wells for 15
to 30 years until remediation goals are met. In December 1992, the Company's
environmental consultants prepared and submitted a Remedial Design Work Plan
(RDWP) to the EPA. During February 1994, the Company received comments from
the EPA with respect to the RDWP and the Company's environmental consultants
submitted their response. The EPA approved the
9
<PAGE>
RDWP in October 1994. On November 14, 1994, engineering field work began in
order to ascertain the engineering design of the treatment plant. The capital
costs of $300,000 to $400,000 to implement the remedy selected are expected
to be incurred over a two year period and include engineering field work,
design and construction of the treatment plant. These costs will be
capitalized when incurred because the treatment plant will prevent further
environmental contamination with respect to the contaminated ground water
being pumped from the extraction wells and improve the property compared with
its condition when acquired by the Company. The Company intends to comply
with the ROD and pump the contaminated ground water through the treatment
plant as required. Presently, LCP National Pipe is leasing the Company's
Vestal, New York facility where it manufactures PVC pipe. Under the terms of
the lease, LCP will operate and maintain the extraction wells on the site in
a manner which complies with environmental requirements. At such time as the
treatment plant is installed, the Company anticipates that operations and
ongoing maintenance will be performed by outside personnel and consultants.
Operations and ongoing maintenance costs consist of labor, sampling and
laboratory testing, power costs, filters, reports and general repair. The EPA
included in the ROD an annual estimate for operating and maintenance costs
totaling $242,000. This estimate covers remediation over a 15 year period and
long-term monitoring over a 30 year period. The Company's environmental
consultants believe the EPA's estimate of $242,000 per year for operating and
maintenance cost is high because the EPA's cost estimate fails to utilize
existing on-site labor and computerized monitoring systems. In addition, the
extraction well pumps are presently being operated by the existing tenant on
the property and no incremental power will be required for the treatment
plant. As a result, the Company's environmental consultants believe a more
realistic annual cost estimate to operate and maintain the facility to be
$70,000 to $100,000 of which less than $15,000 per year represents monitoring
and sampling costs.
In an effort to create greater market value for the Vestal, New York
industrial real estate site, the Company intends to submit a plan to the EPA
which might expedite the completion of the remedial action required at that
site.
Note G
------
As a result of the settlement of certain legal actions, the Company's
consolidated income from continuing operations before income taxes for the
three months ended December 31, 1993, reflects a net credit of $217,000.
The Company is a party to various legal actions which are in the
aggregate immaterial, and due to the nature of the Company's business, it
could be a party in other legal or administrative proceedings arising in the
ordinary course of business. While occasional adverse settlements or
resolutions may occur and negatively impact earnings in the year of
settlement, it is the opinion of management that their ultimate resolution
will not have a material adverse effect on the Company's financial position.
Note H
------
10
<PAGE>
During January 1995, in conjunction with the sale of Flo Control, the
Company paid approximately $2,400,000 of the cash proceeds to its lender to
reduce Flo Control's debt which included the payoff of the term loan. The
financing agreement with its lender was amended to reduce the commitment to
$2,000,000. The loan provides for interest to be paid monthly at a floating
rate of 2-1/2% over the established prime rate (11% at December 31, 1994).
Access to the revolving line of credit is based upon various formulas
relating to accounts receivable and inventories. The credit commitment is
secured by all of the assets of Current Technology, Inc., the $500,000 note
from Patrick Hopkins and the guaranty of the Company. At December 31, 1994,
the debt owed to the Company's lender was $918,000. The Company had
approximately $50,000 of borrowing availability at December 31, 1994.
11
<PAGE>
BUFFTON CORPORATION
-------------------
PART I - FINANCIAL INFORMATION
------------------------------
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL INFORMATION
At December 31, 1994, the Company consists of operations in two
principal segments, electronic products and food and beverage. During the
year ended September 30, 1994 and the three months ended December 31, 1994,
the Company entered into acquisition and disposition transactions as follows:
Effective January 1, 1994, the Company acquired the New Orleans
entertainment operation and the stock of AFC from ECA (Hospitality Division).
Effective February 28, 1994, Contex sold all of the operating assets and
liabilities of MoldCon and Tri-Tec.
By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operation of Flo
Control, headquartered in Burbank, California. The purchaser of these
operations was Russell J. Sarno, President of Flo Control and a board member
of the Company. Mr. Sarno purchased virtually all of the assets of Flo
Control for $3,100,000 in cash and assumed $800,000 of Flo Control's
liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo
Control's 95% ownership interest in the Florida Realty Joint Venture for
$150,000 in cash. In connection with these transactions, Flo Control's
secondary containment product line was sold to Mr. Pat Hopkins for a $500,000
note. As a result of the above transactions, the Company recognized a loss
on disposal of $2,903,000, net of income tax benefit, in its first quarter
ended December 31, 1994. The sale of Flo Control was accounted for as a
discontinued operation. Investment in discontinued operation on the
Consolidated Condensed Balance Sheet represents sales proceeds of $3,750,000
reduced by bank debt and other liabilities of $3,114,000.
The cash proceeds from the sale were used to reduce the Company's
outstanding debt of Flo Control. As a result of the sale of Flo Control's
95% interest in the Florida Realty Joint Venture, the $2.3 million debt of
the Florida Realty Joint Venture, previously consolidated in the Company's
Balance Sheet, was eliminated as well as the monthly expense of the Flo
Control lease.
RESULTS OF OPERATIONS
Consolidated net revenues in 1994 decreased 59% compared to 1993.
Electronic products revenues decreased 76% in 1994 versus 1993 due to the
February 1994 sale of MoldCon and Tri-Tec and the June shutdown of the
Electro-Mech plant in Vestal, New York. The Company's power surge suppressor
manufacturing operation is the only remaining business
12
<PAGE>
included in the Company's electronic products segment. Hospitality Division
revenues were approximately $1,600,000 during the 1994 period.
Consolidated total costs and expenses during 1994 decreased 58% compared
to 1993. Consolidated costs of sales decreased 82% during 1994 versus 1993.
As a percent of related revenues, these costs were 31% in 1994 versus 69% in
1993. Electronic products cost of sales decreased 88% in 1994 compared to
1993. These costs as a percent of revenue were 34% in 1994 compared to 71%
in 1993. The reduction of these costs during the Company's quarter ended
December 31, 1994 were the results of the transactions previously discussed.
Cost of sales related to the Hospitality Division was approximately $450,000
in the 1994 three month period.
Consolidated selling, general and administrative expenses increased 13%
during 1994 versus 1993. The absolute dollar increase in these expenses for
1994 reflects the inclusion of the food and beverage segment effective
January 1, 1994. As a percent of revenue, these expenses were 59% during
1994 versus 22% in 1993. Electronic products selling, general and
administrative expenses decreased 44% in 1994 compared to 1993. As a percent
of revenue, these expenses for 1994 were 47% versus 29% in 1993. The
decrease in selling, general and administrative expense associated with the
electronic products segment was the result of reasons previously discussed.
These expenses associated with the Hospitality Division were approximately
$950,000 during the 1994 three month period.
Interest expense declined 68% during 1994 compared to 1993 as a result
of the sale of MoldCon and Tri-Tec and the shutdown of the Company's Vestal,
New York Plant and related reduction in long-term debt.
During the three months ended December 31, 1994, the Company reported
income from continuing operations before income taxes of $115,000 versus
$478,000 in 1993. This decline was associated with the sale and shutdown of
electronic products cable assembly plants during the 1994 fiscal year.
Additionally, the Company's power surge suppressor manufacturing operation
reported slightly lower profit in 1994 compared to 1993. This decline was
due to the completion of deliveries on one contract during fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
During March 1992, the United States Environmental Protection Agency
(EPA), issued a Record of Decision (ROD) with respect to the Company's
Superfund Site in Vestal, New York. An Administrative Order for Remedial
Design and Remedial Action was issued in October 1, 1992. The ROD requires
the Company to construct a water treatment facility at the site and to pump
contaminated ground water from bedrock and overburden extraction wells for 15
to 30 years until remediation goals are met. In December 1992, the Company's
environmental consultants prepared and submitted a Remedial Design Work Plan
(RDWP) to the EPA. During February 1994, the Company received comments from
the EPA with respect to the RDWP and the Company's environmental consultants
submitted their response. The EPA approved the RDWP in October 1994. On
November 14, 1994, engineering field work began in order to ascertain the
engineering design of the treatment plant. The capital costs of $300,000 to
13
<PAGE>
$400,000 to implement the remedy selected are expected to be incurred over a
two year period and include engineering field work, design and construction
of the treatment plant. These costs will be capitalized when incurred
because the treatment plant will prevent further environmental contamination
with respect to the contaminated ground water being pumped from the
extraction wells and improve the property compared with its condition when
acquired by the Company. The Company intends to comply with the ROD and pump
the contaminated ground water through the treatment plant as required.
Presently, LCP National Pipe is leasing the Company's Vestal, New York
facility where it manufactures PVC pipe. Under the terms of the lease, LCP
will operate and maintain the extraction wells on the site in a manner which
complies with environmental requirements. At such time as the treatment
plant is installed, the Company anticipates that operations and ongoing
maintenance will be performed by outside personnel and consultants.
Operations and ongoing maintenance costs consist of labor, sampling and
laboratory testing, power costs, filters, reports and general repair. The
EPA included in the ROD an annual estimate for operating and maintenance
costs totaling $242,000. This estimate covers remediation over a 15 year
period and long-term monitoring over a 30 year period. The Company's
environmental consultants believe the EPA's estimate of $242,000 per year for
operating and maintenance cost is high because the EPA's cost estimate fails
to utilize existing on-site labor and computerized monitoring systems. In
addition, the extraction well pumps are presently being operated by the
existing tenant on the property and no incremental power will be required for
the treatment plant. As a result, the Company's environmental consultants
believe a more realistic annual cost estimate to operate and maintain the
facility to be $70,000 to $100,000 of which less than $15,000 per year
represents monitoring and sampling costs.
In an effort to create greater market value for the Vestal, New York
industrial real estate site, the Company intends to submit a plan to the EPA
which might expedite the completion of the remedial action required at the
site.
During January 1995, in conjunction with the sale of Flo Control, the
Company paid approximately $2,400,000 of the cash proceeds to its lender to
reduce Flo Control's debt which included the payoff of the term loan. The
financing agreement with its lender was amended to reduce the commitment to
$2,000,000. The loan provides for interest to be paid monthly at a floating
rate of 2-1/2% over the established prime rate (11% at December 31, 1994).
Access to the revolving line of credit is based upon various formulas
relating to accounts receivable and inventories. The credit commitment is
secured by all of the assets of Current Technology, Inc., the $500,000 note
from Patrick Hopkins and the guaranty of the Company. At December 31, 1994,
the debt owed to the Company's lender was $918,000. The Company had
approximately $50,000 of borrowing availability at December 31, 1994.
Effective January 1, 1994, the Company entered into an agreement with
Entertainment Centers of America, Inc. (ECA) to acquire the New Orleans
operations of ECA in exchange for the Company's note receivable from and
equity interest in ECA approximating $2,641,000 as well as 600,000 shares of
its common stock and $159,000 in cash. The market value of the 600,000
shares was $824,000 at the date of the acquisition. The agreement provided
for the transfer of 235,000 shares of the 600,000 shares of the Company's
common stock to be issued to the owners and certain creditors of ECA and its
subsidiaries.
14
<PAGE>
The assets acquired consisted of cash, inventory, leasehold interests
and improvements, sound, light, video and bar equipment and certain other
assets, including prepaids. Liabilities assumed by a subsidiary of the
Company consisted of trade accounts payable and other accrued liabilities in
ordinary course of business and debt of approximately $815,000 outstanding at
January 1, 1994. The acquisition was accounted for under purchase accounting
and the results of operations were consolidated beginning with the effective
date.
In addition to the above described transactions with ECA, the Company
had a note receivable from ECA at January 1, 1994 aggregating $400,000 and
advances of $320,000. The Company also had an option to purchase the stock
of American Food Classics, Inc. (AFC) from ECA at the greater of fair market
value, to be determined by an independent appraisal, or $300,000. The
Company exercised its option January 1, 1994 and exchanged its note
receivable from and advances to ECA for the stock of AFC. The note
receivable and advances approximated the fair market value of the AFC stock
at the date of exchange.
The New Orleans operations and AFC are collectively referred to as the
"Hospitality Division".
Effective February 28, 1994, Contex Electronics, Inc., a subsidiary of
the Company, sold all of the operating assets and liabilities of MoldCon and
Tri-Tec, two of its wholly owned subsidiaries. The sales price for the
assets was $9,277,000 in cash plus the assumption of certain liabilities by
the buyer. The net proceeds from the disposition were used to reduce bank
debt approximately $5,000,000 and for short-term investments.
The assets sold consisted primarily of trade accounts receivable,
inventory, machinery, equipment and furniture and fixtures. Liabilities
assumed by the Buyer consisted of trade accounts payable and other accrued
liabilities in the ordinary course of business. The assets and liabilities
related to the manufacture of molded internal and external cable assemblies
and internal wiring harnesses.
After deducting applicable selling expenses, the Company reported a
pretax gain of $1,050,000 on the sale during the quarter ended March 31,
1994. The results of operations, relative to the businesses sold are
included in the Company's statements of income for the three months ended
December 31, 1993. Revenue and operating profit was $5,538,000 and $224,000,
respectively, for the three month period ended December 31, 1993.
By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, Flo Control sold substantially all of
its operating assets. The sales price for the assets was $3,100,000 in cash,
plus the assumption of $800,000 of liabilities. As a condition of the sale,
the Buyer was required to purchase for $150,000 in cash Flo Control's
15
<PAGE>
undivided ninety-five percent (95%) joint venture interest in Florida Realty
Joint Venture. Additionally, Flo Control sold its secondary containment
assets for a $500,000 note. The transaction was accounted for as a
discontinued operation. Investment in discontinued operation on the
Consolidated Condensed Balance Sheet represents sales proceeds of $3,750,000
reduced by bank debt and other liabilities of $3,114,000.
The assets sold consisted primarily of trade accounts receivable,
inventory, machinery, equipment and furniture and fixtures. Liabilities
assumed by the buyer consisted of trade accounts payable and other accrued
liabilities in the ordinary course of business. The assets and liabilities
related to the manufacture of polyvinyl chloride pipe fittings.
The Company anticipates, based upon a continuation of the operating
results of its last year and current fiscal quarter, that it will have
sufficient cash flow and borrowing availability to meet its ongoing
operational needs, as well as payments required under existing debt
agreements.
The Company invested $210,000 in machinery, equipment, furniture,
fixtures, and enhancements to existing property during the three months ended
December 31, 1994.
16
<PAGE>
BUFFTON CORPORATION
-------------------
PART II - OTHER INFORMATION
---------------------------
Item 1. - Legal Proceedings
None
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
17
<PAGE>
BUFFTON CORPORATION
-------------------
SIGNATURES
----------
Pursuant to 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.
BUFFTON CORPORATION
(Registrant)
By: /s/Robert H. McLean
-----------------------
Chairman of the Board
and President
February 13, 1995
-----------------
By: /s/Robert Korman
------------------------
Vice President and
Chief Financial Officer
February 13, 1995
-----------------
18
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,158
<SECURITIES> 0
<RECEIVABLES> 1,906
<ALLOWANCES> (93)
<INVENTORY> 1,104
<CURRENT-ASSETS> 6,983
<PP&E> 5,236
<DEPRECIATION> (2,057)
<TOTAL-ASSETS> 15,709
<CURRENT-LIABILITIES> 2,381
<BONDS> 0
<COMMON> 264
0
0
<OTHER-SE> 12,020
<TOTAL-LIABILITY-AND-EQUITY> 15,709
<SALES> 4,117
<TOTAL-REVENUES> 4,117
<CGS> 1,276
<TOTAL-COSTS> 4,002
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 115
<INCOME-TAX> 43
<INCOME-CONTINUING> 72
<DISCONTINUED> (3,102)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,030)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> 0.00
</TABLE>
