<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 June 30, 1996 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 June 30, 1996
- ---------------------------- --------------------------------
Common stock, $.05 par value 6,726,878
1
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BUFFTON CORPORATION
Index
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information............................................ 3
Item 1 - Financial Statements............................................. 3
Consolidated Condensed Balance Sheets (Unaudited) June 30, 1996
and September 30, 1995.................................................. 3
Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended June 30, 1996 and 1995............................... 4
Consolidated Condensed Statements of Operations (Unaudited)
Nine Months Ended June 30, 1996 and 1995................................ 5
Consolidated Condensed Statements of Cash Flow (Unaudited)
Nine Months Ended June 30, 1996 and 1995................................ 6
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................................................... 11
Part II - Other Information............................................... 15
Signatures................................................................ 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BUFFTON CORPORATION
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
----------- --------------
(Unaudited)
(In thousands)
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents................................... $ 131 $ 7
Accounts receivable, net of allowance for
doubtful accounts of $98,000 and $75,000,
respectively............................................. 3,671 2,893
Inventories................................................. 1,732 2,031
Prepaid and other current assets............................ 449 498
------- -------
Total current assets..................................... 5,983 5,429
------- -------
Property and equipment, at cost.............................. 11,502 7,529
Less: Accumulated depreciation and amortization............ (2,446) (2,062)
------- -------
Net property and equipment................................... 9,056 5,467
------- -------
Patents, net of accumulated amortization of
$1,509,000 and $1,358,000, respectively................... 1,471 1,617
Goodwill, net of amortization of $871,000 and
$754,000, respectively.................................... 4,112 3,503
Deferred income taxes........................................ 590 590
Long-term note receivable.................................... 300 350
Other assets, net............................................ 1,080 268
------- -------
$22,592 $17,224
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt........................... $ 188 $ -
Accounts payable............................................ 803 1,001
Accrued liabilities......................................... 1,102 1,368
Income taxes................................................ 549 236
------- -------
Total current liabilities.................................. 2,642 2,605
------- -------
Long - term debt............................................. 2,540 -
------- -------
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;
6,726,878 and 5,685,378 shares outstanding, respectively.. 336 284
Additional paid-in capital.................................. 14,446 12,571
Retained earnings........................................... 2,628 1,764
------- -------
Total stockholders' equity................................. 17,410 14,619
------- -------
$22,592 $17,224
======= =======
</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 June 30,
--------------
1996 1995
---- ----
(In thousands, except
per share amounts)
<S> <C> <C>
Net revenues..................................... $6,870 $5,032
------ ------
Costs and expenses:
Cost of goods sold (exclusive of depreciation).. 2,324 1,535
Selling, general and administrative............. 3,590 2,834
Depreciation and amortization................... 337 243
Interest........................................ 77 27
------ ------
Total costs and expenses....................... 6,328 4,639
------ ------
Income from continuing operations before
income taxes.................................... 542 393
Income tax provision............................. 204 137
------ ------
Income from continuing operations................ 338 256
Utilization of income tax benefit related to
loss on disposal of discontinued operation - 362
------ ------
Net income....................................... $ 338 $ 618
====== ======
Income per average common share:
Continuing operations........................... $ .05 $ .05
Discontinued operation.......................... - .07
------ ------
Net income...................................... $ .05 $ .12
====== ======
Weighted average common shares outstanding....... 6,727 5,520
====== ======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
4
<PAGE>
BUFFTON CORPORATION
Consolidated Condensed Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
------------------
1996 1995
---- ----
(In thousands, except
per share amounts)
<S> <C> <C>
Net revenues...................................... $18,178 $14,200
------- -------
Costs and expenses:
Cost of goods sold (exclusive of depreciation)... 6,231 4,341
Selling, general and administrative.............. 9,510 8,092
Depreciation and amortization.................... 992 725
Interest......................................... 172 99
------- -------
Total costs and expenses........................ 16,905 13,257
------- -------
Income from continuing operations before
income taxes..................................... 1,273 943
Income tax provision.............................. 409 302
------- -------
Income from continuing operations................. 864 641
Discontinued operation:
Loss from operations, net of income tax benefit
of $107,000..................................... - (199)
Loss on disposal, net of income tax benefit
of $527,000..................................... - (2,541)
------- -------
Loss from discontinued operation................. - (2,740)
------- -------
Net income (loss)................................. $ 864 $(2,099)
======= =======
Income (loss) per average common share:
Continuing operations............................ $ .14 $ .12
Discontinued operation........................... - (.51)
------- -------
Net income (loss)................................ $ .14 $ (.39)
======= =======
Weighted average common shares outstanding........ 6,360 5,409
======= =======
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
5
<PAGE>
BUFFTON CORPORATION
Consolidated Condensed Statements of Cash Flow (Unaudited)
Nine Months
Ended June 30,
--------------------
1996 1995
------- -------
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Net cash used in operating activities.......... $ 1,347 $ 379
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment... (1,005) (694)
Construction in progress, primarily tooling.. - (204)
Additions to other assets.................... (339) (427)
Proceeds from sale of operating assets....... - 3,750
Acquisitions, net of cash acquired........... (1,007) -
------- -------
Net cash provided by investing activities...... (2,351) 2,425
------- -------
Cash flows from financing activities:
Additions to long-term debt.................. 1,200 -
Repayments of long-term debt................. (72) (3,329)
------- -------
Net cash used in financing activities.......... 1,128 (3,329)
------- -------
Net increase in cash........................... 124 (525)
Cash at beginning of period.................... 7 3,196
------- -------
Cash at end of period.......................... $ 131 $ 2,671
======= =======
</TABLE>
Supplemental Disclosures of Cash Flow Information
Supplemental cash flow information:
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
--------------
1996 1995
------ ------
(In thousands)
<S> <C> <C>
Cash paid for:
Interest................................... $ 87 $ 99
Income taxes............................... 48 52
Noncash investing and financing activities:
Fair value of assets acquired.............. $4,660 $ -
Liabilities assumed........................ 1,754 -
Stock issued............................... 1,804 -
------ -----
Cash paid.................................. 1,102 -
Less: Cash acquired....................... 95 -
------ -----
Net cash paid for acquisitions............. $1,007 $ -
====== =====
</TABLE>
See accompanying notes to unaudited Consolidated Condensed Financial Statements.
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 June 30, 1996, the results of its
operations for the three and nine month periods ended June 30, 1996 and 1995
and its cash flows for the nine month periods ended June 30, 1996 and 1995.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements in the 1995 Buffton Corporation
Annual Report on Form 10-K.
Note B
------
The results of operations for the three and nine month periods ended
June 30, 1996 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>
June 30, September 30,
1996 1995
------ ------
(In thousands)
<S> <C> <C>
Raw materials.......................... $1,013 $1,450
Work in process........................ 487 323
Finished goods......................... 232 258
------ ------
$1,732 $2,031
====== ======
</TABLE>
7
<PAGE>
Note E
------
By approval of the Company's Board of Directors in December 1994, in a
transaction effective January 1, 1995, the Company sold the operations of Flo
Control, Inc. (Flo Control), headquartered in Burbank, California. The
purchaser of these operations was Mr. 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 and assume the related non-recourse mortgage
approximating $2.3 million. In connection with these transactions, Flo
Control's secondary containment product line was sold to Mr. Pat Hopkins, an
unrelated third party, for a $500,000 note. The note bears interest at 8% per
annum. Payments are due semiannually beginning June 30, 1995 and continuing
through December 31, 1999 in the amount of $50,000 plus earned interest. The
note is secured by the assets sold and the personal guaranty of an unrelated
third party individual. As a result of the above transactions, the Company
recognized a loss on disposal of $2,903,000, net of income tax benefit,
during the three months ended December 31, 1994. The sale of Flo Control was
accounted for as a discontinued operation. The cash proceeds from the sale
were used to reduce the company's outstanding debt with its lender. Flo
Control's revenues for the three months ended December 31, 1994 were
$2,435,000.
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 on October 1, 1992. The ROD required
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 were met. In December 1992, the
Company's environmental consultants prepared and submitted a Remedial Design
Work Plan (RDWP) to the EPA. The EPA issued comments on the RDWP on October
1, 1993, and a revised RDWP was submitted to EPA on October 21, 1993. During
February 1994, the Company received comments from the EPA with respect to the
revised RDWP and the Company's environmental consultants submitted a
response. The EPA approved the revised RDWP in October 1994. On November
14, 1994, engineering design and related fieldwork was begun in order to meet
the specifications of the revised RDWP.
During the nine months ended June 30, 1996 and the year ended September
30, 1995, $229,000 and $430,000, respectively, were incurred for work related
to the engineering design. These costs were capitalized when incurred because
the remedy would 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. Due to concerns about the correctness of the remedy provided for in
the ROD, additional fieldwork was performed and in June 1995, an RDWP
Addendum was prepared and
8
<PAGE>
submitted to the EPA. The Company received comments from the EPA regarding
this Addendum, and the Company's environmental consultants submitted a
response shortly thereafter.
On August 24, 1995, the Company and its legal and environmental
consultants met with officials of the EPA and agreed on the additional
testing fieldwork deemed necessary by the EPA to support the Company's
position regarding the RDWP Addendum. At this meeting, officials of the EPA
agreed the remedy needed to be modified and that certain requirements under
the existing ROD needed to be eliminated or reduced in scope. Since this
meeting, additional fieldwork provided for in the RDWP Addendum has been
conducted at the site and resulted in the formulation of a revised remedy.
On December 19, 1995, the Company, and its legal and environmental
consultants presented to the EPA the RDWP Addendum and the recommended
changes to the ROD in the form of a revised remedy. The revised remedy was
favorably received by the EPA and will be reviewed. The revised remedy
eliminates certain requirements of the existing ROD and significantly reduces
the time period for remediation. Initial estimates of the revised remedy
indicate capital costs of approximately $800,000 to $900,000, and ongoing
maintenance costs of approximately $200,000 to $250,000 in the aggregate.
The capital costs would be incurred over a one to two year period after the
ROD is amended with the ongoing maintenance costs being incurred over a five
year period after capital cost completion. On July 16, 1996, the Company and
its legal and environmental representatives met with the EPA to review the
EPA's written response to the revised remedy presented in December 1995. As
a result of this meeting, a review of a possibly more attractive and cost
efficient remedy is being discussed with the EPA. The EPA now estimates that
a revised ROD can be issued by the end of calendar 1996.
Note G
------
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
------
In January 1996, the Company refinanced a $1,600,000 bank term loan
assumed in the acquisition of the Stockyards Hotel and is secured by a deed
of trust on the hotel property. The note currently bears interest at the
established prime rate; however, this rate can increase, subject to certain
financial ratios, to a maximum of 1% above the prime rate. The note is
payable in 59 installments of $13,350 plus accrued interest, with the balance
due on January 19, 2001.
In March 1996, one of the Company's subsidiaries entered into an one
year financing agreement with a bank to replace its existing line of credit.
The commitment consists of a $2,000,000 revolving line of credit, all of
which was available for borrowing at June 30, 1996, and
9
<PAGE>
is secured by the accounts receivable and inventory of the subsidiary. The
loan provides for interest to be paid monthly at a floating rate equal to the
established prime rate.
In March 1996, the Company borrowed $1,200,000 from an insurance
company. The note is secured by a deed of trust on a commercial office
building located in Fort Worth, Texas. The note bears interest at 7.75%,
payable in 119 monthly installments of $9,852 with a final payment of
$830,616.53 due April 1, 2006.
Note I
------
Effective January 1, 1996, the Company entered into an agreement to
purchase the assets of Cabo Tacobar One, Ltd. (Cabo), a Mexican restaurant
concept with Central and South American influences located in Houston, Texas,
for $589,000 in cash and 375,000 shares of the Company's common stock. Cabo
currently has one restaurant operating and another location under lease.
Additionally, the Company entered into an agreement to purchase the assets
and assume certain liabilities related to the Stockyards Hotel, located in
Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the Company's
common stock and the refinancing of a $1,600,000 bank term loan. Under this
agreement, the Company has guaranteed, for a limited period of time, a sales
price of $2.05 per share for any of the Company's stock that may be sold.
These acquisitions were accounted for under purchase accounting and are
included in the Company's results of operations beginning on the
acquisitions' effective date of January 1, 1996. Excess of purchase price
over fair value of net tangible assets acquired approximates $1,200,000 and
is recorded as Goodwill.
Unaudited pro forma results from continuing operations, as if the
acquisitions had occurred at the beginning of each respective period, are as
follows:
<TABLE>
<CAPTION>
Nine Months
Ended June 30,
---------------------------------
1996 1995
--------------- ----------------
(In thousands, except
per share amounts)
<S> <C> <C>
Revenues............................... $18,976 $15,589
Net income from continuing operations.. 907 658
Income per average common share........ .14 .11
</TABLE>
10
<PAGE>
BUFFTON CORPORATION
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL INFORMATION
At June 30, 1996, the Company consists of operations in two principal
segments, electronic products and hospitality group. During the year ended
September 30, 1995 and the nine months ended June 30, 1996, the Company entered
into the following acquisition and disposition transactions.
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., headquartered in Burbank, California. See Note E of Notes to
Consolidated Condensed Financial Statements for details of the sale.
Effective January 1, 1996, the Company entered into agreements to purchase
the assets of Cabo Tacobar One, Ltd. (Cabo), located in Houston, Texas and to
purchase the assets and assume certain liabilities related to the Stockyards
Hotel (SYH), located in Fort Worth, Texas. See Liquidity and Capital Resources
in this section and Note I of Notes to Consolidated Condensed Financial
Statements for details of the acquisitions.
RESULTS OF OPERATIONS
Consolidated net revenues in the 1996 three and nine month periods
increased 36% and 28%, respectively, compared to 1995. Electronic products
revenues for the 1996 three and nine month periods increased 24% and 27%,
respectively, due to shipments made under the terms of a contract obtained in
late fiscal 1995 for its DBCS line. Shipment terms under this contract continue
through July 1997. Hospitality Division revenues for the 1996 three and nine
month periods increased 73% and 34%, respectively, due to the inclusion of the
results of operations of Cabo and SYH effective January 1, 1996.
Consolidated total costs and expenses during the 1996 three and nine month
periods increased 36% and 28%, respectively, compared to 1995. Consolidated
costs of sales increased 37% and 28% during the 1996 three and nine month
periods versus 1995. As a percent of related
11
<PAGE>
revenue, these costs were 34% during the 1996 three and nine month periods
versus 31% a year earlier. Electronic products cost of sales during the 1996
three and nine month periods increased 56% and 56%, respectively, compared to
1995. These costs as a percent of revenue were 41% in the 1996 three month
period compared to 33% in 1995 and 42% in the 1996 six month period compared to
34% in 1995. The increase in absolute dollars was due to increased sales and the
increase in costs as a percent of revenue is due to a greater percentage of
sales of the DBCS line in 1996, which have a lower gross margin than the power
siftor line. Cost of sales related to the Hospitality Division during the 1996
three and nine month periods increased 39% and 16%, respectively. This increase
is due to the inclusion of the results of operations of Cabo and SYH effective
January 1, 1996.
Consolidated selling, general and administrative expenses for the 1996
three and nine month periods increased 27% and 18%, respectively, compared to
1995. The absolute dollar increase in these expenses is due to increased sales
levels incurred during 1996. As a percent of revenue, these expenses were 53%
for the 1996 three month period versus 56% in 1995 and were 52% for the 1996
nine month period versus 57% in 1995. Electronic products selling, general and
administrative expenses for the 1996 three and nine month periods approximated
the 1995 amounts. The expenses associated with the Hospitality Division for the
1996 three and nine month periods increased 80% and 46%, respectively, compared
to 1995. This increase is due to the inclusion of the results of operations of
Cabo and SYH effective January 1, 1996.
The increase in interest expense to $77,000 for the 1996 three month period
from $27,000 in 1995 and to $172,000 for the 1996 nine month period from $99,000
in 1995 is primarily due to the refinancing of a $1,600,000 bank term loan
assumed in connection with the acquisition of SYH and the borrowing of
$1,200,000 from an insurance company, secured by a deed of trust on a commercial
office building located in Fort Worth, Texas.
During the three months ended June 30, 1996, the Company reported income
from continuing operations before income taxes of $542,000 versus $395,000 in
1995. During the nine months ended June 30, 1996, the Company reported income
from continuing operations before income taxes of $1,273,000 versus $945,000 in
1995. These increases are due to the Company's electronic products operation
reporting higher profit in 1996 compared to 1995 and are attributable to higher
sales levels.
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 on October 1, 1992. The ROD required 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 were met. In December 1992, the Company's environmental
consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the
EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP
was submitted to
12
<PAGE>
EPA on October 21, 1993. During February 1994, the Company received comments
from the EPA with respect to the revised RDWP and the Company's environmental
consultants submitted a response. The EPA approved the revised RDWP in October
1994. On November 14, 1994, engineering design and related fieldwork was begun
in order to meet the specifications of the revised RDWP.
During the nine months ended June 30, 1996, and the year ended September
30, 1995, $229,000 and $430,000, respectively, were incurred for work related to
the engineering design. These costs are were capitalized when incurred
because the remedy would 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. Based on this work performed for the treatment plant, Due to concerns
about the correctness of the remedy provided for in the ROD, additional
fieldwork was performed and in June 1995, an RDWP Addendum was prepared and
submitted to the EPA. The Company received comments from the EPA regarding this
Addendum, and the Company's environmental consultants submitted a response
shortly thereafter.
On August 24, 1995, the Company and its legal and environmental
consultants met with officials of the EPA and agreed on the additional testing
fieldwork deemed necessary by the EPA to support the Company's position
regarding the RDWP Addendum. At this meeting, officials of the EPA agreed the
remedy needed to be modified and that certain requirements under the existing
ROD needed to be eliminated or reduced in scope. Since this meeting, additional
fieldwork provided for in the RDWP Addendum has been conducted at the site and
resulted in the formulation of a revised remedy. On December 19, 1995, the
Company, and its legal and environmental consultants presented to the EPA the
RDWP Addendum and the recommended changes to the ROD in the form of a revised
remedy. The revised remedy was favorably received by the EPA and will be
reviewed. The revised remedy eliminates certain requirements of the existing ROD
and significantly reduces the time period for remediation. Initial estimates of
the revised remedy indicate capital costs of approximately $800,000 to $900,000,
and ongoing maintenance costs of approximately $200,000 to $250,000 in the
aggregate. The capital costs would be incurred over a one to two year period
after the ROD is amended with the ongoing maintenance costs being incurred over
a five year period after capital cost completion. On July 16, 1996, the Company
and its legal and environmental representatives met with the EPA to review the
EPA's written response to the revised remedy presented in December 1995. As a
result of this meeting, a review of a possibly more attractive and cost
efficient remedy is being discussed with the EPA. The EPA now estimates that a
revised ROD can be issued by the end of calendar 1996.
Effective January 1, 1996, the Company entered into an agreement to
purchase the assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept
with Central and South American influences located in Houston, Texas, for
$589,000 in cash and 375,000 shares of the Company's common stock. At the
purchase date, the Cabo restaurant had 1,300 square feet with 58 seats but
has been expanded to 3,000 square feet with 120 seats. Cabo is located in a
strip center and is open seven days a week for lunch and dinner. The check
average is $11.50. Additionally, the Company entered into an agreement to
purchase the assets and assume certain liabilities of the Stockyards Hotel,
located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the
Company's common stock and the refinancing of a $1,600,000 bank term loan.
Under this
13
<PAGE>
agreement, the Company has guaranteed, for a limited period of time, a sales
price of $2.05 per share for any of this stock that may be sold. At June 30,
1996, no liability had been incurred under the guarantee agreement. These
acquisitions were accounted for under purchase accounting and are included in
the Company's Results of Operations beginning on the acquisitions' effective
date of January 1, 1996. Excess of purchase price over fair value of net
tangible assets acquired approximates $1,200,000 and is recorded as Goodwill.
The Company currently plans to open a second Cabo unit in downtown Houston in
late 1996 and to develop a destination food and beverage operation at SYH.
In March 1996, one of the Company's subsidiaries entered into an one
year financing agreement with a bank to replace its existing line of credit.
The commitment consists of a $2,000,000 revolving line of credit, all of
which was available for borrowing at June 30, 1996, and is secured by the
accounts receivable and inventory of the subsidiary. The loan provides for
interest to be paid monthly at a floating rate equal to the established prime
rate.
In March 1996, the Company borrowed $1,200,000 from an insurance
company. The note is secured by a deed of trust on a commercial office
building located in Fort Worth, Texas. The note bears interest at 7.75%,
payable in 119 monthly installments of $9,852 with a final payment of
$830,616.53 due April 1, 2006. The note proceeds will be used for expansion
of Cabo and SYH.
Effective July 1, 1996, the Company sold one of its entertainment facilities
located in New Orleans, Louisiana. The proceeds of $464,000, consisting of
cash and a note receivable, approximated the net book value of the assets
that were sold.
14
<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
None
15
<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
August 13, 1996
By: /s/ Robert Korman
---------------------------
Vice President and
Chief Financial Officer
August 13, 1996
16
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