[TEST]
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1995 Commission File Number 0-9659
------------------ ------
SIGNATURE INNS, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1426996
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
- ------------------------------------------------------ ----------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (317) 581-1111
--------------
Check whether the Registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
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7,783,827 Common Shares were outstanding as of November 10, 1995.
<PAGE>
SIGNATURE INNS, INC.
INDEX
Part I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations
Three and nine months ended September 30, 1995 and 1994
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
Consolidated Statements of Shareholders' Equity
Nine months ended September 30, 1995 and year ended
December 31, 1994
Consolidated Statements of Cash Flows
Nine months ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Part II - OTHER INFORMATION
- ---------------------------
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<TABLE>
SIGNATURE INNS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Three months Ended Nine Months Ended
September 30, September 30,
- ------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Hotel revenues $1,028,358 995,297 2,687,484 3,127,351
Management and franchise fees 924,252 896,265 2,405,060 2,327,358
---------- ---------- ---------- ----------
1,952,610 1,891,562 5,092,544 5,454,709
---------- ---------- ---------- ----------
Costs and expenses:
Hotel costs and expenses 477,115 455,453 1,322,526 1,610,888
Hotel depreciation and amortization 65,439 72,807 196,317 319,121
General and administrative expenses 567,042 505,449 1,688,540 1,599,033
Other depreciation and amortization 64,498 27,378 120,451 82,287
---------- ---------- ---------- ----------
1,174,094 1,061,087 3,327,834 3,611,329
---------- ---------- ---------- ----------
Operating income 778,516 830,475 1,764,710 1,843,380
---------- ---------- ---------- ----------
Other income (deductions):
Equity in income of hotel
limited partnerships 348,102 310,336 649,072 700,544
Interest income 78,945 45,159 195,748 103,408
Interest expense - hotels (160,680) (164,047) (477,682) (671,292)
Interest expense - corporate (74,293) (111,087) (274,050) (332,987)
Capital appreciation fee (154,349) (73,341) (610,990) (164,617)
Gain (loss) on disposition of
hotel, land and related assets 163,032 (697) 163,032 11,285
Other (77,717) (55,028) (150,974) (87,021)
---------- ---------- ---------- ----------
(123,040) (48,705) (505,844) (440,680)
---------- ---------- ---------- ----------
Income before extraordinary item 901,556 781,770 1,258,866 1,402,700
Extraordinary item - gain
from debt extinguishment - - - 277,805
---------- ---------- ---------- ----------
Net Income $ 901,556 781,770 1,258,866 1,680,505
========== ========== ========== ==========
Per common share data:
Income before
Extraordinary item 0.12 0.10 0.16 0.23
Extraordinary item - - - 0.05
---------- ---------- ---------- ----------
Net income $ 0.12 0.10 0.16 0.28
========== ========== ========== ==========
Weighted average shares
outstanding 7,783,827 7,783,827 7,783,827 6,019,475
========== ========== ========== ==========
</TABLE>
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<TABLE>
SIGNATURE INNS, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
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September 30, December 31,
1995 1994
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ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents:
Corporate 1,198,655 1,153,753
Consolidated hotels 1,249,868 881,760
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2,448,523 2,035,513
Other current assets 565,309 491,886
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Total current assets 3,013,832 2,527,399
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Hotel limited partnerships:
Equity investments 1,325,667 1,377,930
Receivables, net 3,630,712 3,429,712
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4,956,379 4,807,642
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Property and equipment, net:
Consolidated hotels 5,218,410 5,327,740
Land held for sale 913,739 913,739
Corporate 269,629 301,726
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6,401,778 6,543,205
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Deferred costs and other assets, net of accumulated
amortization of $448,173 and $452,990 318,515 215,721
----------- -----------
$14,690,504 14,093,967
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt:
Consolidated hotels 65,306 3,128,478
Corporate subordinate note 455,560 -
Other current liabilities 723,611 527,037
---------- ----------
Total current liabilities 1,244,477 3,655,515
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Long-term debt, less current portion:
Consolidated hotels 6,652,248 3,596,888
Corporate line of credit 900,000 1,500,000
Corporate subordinate note 1,244,440 1,800,000
Accrued capital appreciation fee - 289,010
----------- -----------
8,796,688 7,185,898
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Other partners' equity 216,663 148,369
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Total liabilities 10,257,828 10,989,782
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Shareholders' equity:
Common stock, no par value.
Authorized 20,000,000 shares 9,805,973 9,736,348
Accumulated deficit (5,373,297) (6,632,163)
----------- -----------
Total shareholders' equity 4,432,676 3,104,185
----------- -----------
$14,690,504 14,093,967
=========== ===========
</TABLE>
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<TABLE>
SIGNATURE INNS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<CAPTION>
Common Stock
_______________________________ Accumulated
Shares Amount Deficit Total
____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at December 31, 1993 3,425,807 $9,235,445 (8,738,218) 497,227
Net income 2,106,055 2,106,055
Common shares issued 4,358,020 779,403 779,403
Notes receivable (278,500) (278,500)
---------- ----------- ----------- ----------
Balance at December 31, 1994 7,783,827 9,736,348 (6,632,163) 3,104,185
Net income 1,258,866 1,258,866
Collection of notes receivable 69,625 69,625
---------- ----------- ----------- ----------
Balance at September 30, 1995 7,783,827 $9,805,973 (5,373,297) 4,432,676
========== =========== =========== ==========
</TABLE>
<PAGE>
<TABLE>
SIGNATURE INNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
- ---------------------------------------------------------------------------------------
Nine months ended September 30 1995 1994
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,258,866 1,680,505
Items which do not use (provide) cash:
Depreciation of property and equipment 248,555 357,094
Amortization of deferred costs 68,213 44,314
Equity in income of hotel limited partnerships, net (649,072) (700,544)
Other partners' equity in income 191,347 110,393
Capital appreciation fee accrual 610,990 164,617
Gain from debt extinguishment - (277,805)
Gain on disposal of hotel (163,032) (11,285)
Other current items 123,151 (88,929)
Other non-current items (19,381) (25,407)
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Net cash provided by operating activities 1,669,637 1,252,953
---------- ----------
Cash flows from investing activities:
Proceeds from sale of hotel 163,032 4,310,000
Property and equipment additions (104,359) (49,659)
Distributions received from
hotel limited partnership 717,947 451,651
Loans to hotel limited partnerships - (556,600)
Advances to hotel limited partnership, net (201,000) 80,000
Deferred costs and other assets (171,007) (23,952)
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Net cash provided by investing activities 404,613 4,211,440
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Cash flows from financing activities:
Proceeds of long-term debt 2,100,000 -
Repayments of long-term debt (3,707,812) (5,090,340)
Proceeds from issuance of common stock 69,625 500,903
Cash distributions to partners
by consolidated hotel (123,053) (7,500)
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Net cash used by financing activities (1,661,240) (4,596,937)
----------- ----------
Change in cash and cash equivalents 413,010 867,456
Cash and cash equivalents at beginning of period 2,035,513 1,219,946
----------- ----------
Cash and cash equivalents at end of period $2,448,523 2,087,402
=========== ==========
Supplemental information:
Interest paid $ 655,546 915,903
========== ==========
Income taxes paid $ 19,637 11,000
========== ==========
</TABLE>
<PAGE>
SIGNATURE INNS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, the financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the interim
period are not necessarily indicative of the results that may be expected for
the year ended December 31, 1995. For further information, refer to the
financial statements included in the Registrant's annual report on Form 10-KSB
for the year ended December 31, 1994.
NOTE B - AGREEMENT TO REFINANCE SUBORDINATE DEBT
In August 1995 the Company reached an agreement with Banc One Capital Partners
II (BOCP II) to repay the $1,800,000 variable rate subordinate note and
satisfy the capital appreciation fee obligation prior to their contractual
maturity. On September 1, 1995 the Company repaid the balance of the
subordinate note along with a single $900,000 cash payment in full
satisfaction of the capital appreciation fee. The agreement provides that if
a change of control of the Company, as defined, occurs prior to December 1996
an additional fee may be payable to BOCP II.
The source of funds for this transaction was provided by a new $1,700,000
term note from Bank One, Indianapolis along with an advance from the Company's
line of credit and corporate cash. The new term note requires monthly
principal payments through December 1998 along with interest at the prime rate
plus 1.25% per annum.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Hotel Operations
Hotel operations of two hotels owned by consolidated affiliates (Indianapolis
South and Elkhart) are included in the statement of operations for the nine
months ended September 30, 1995 and 1994. The operating results of the
Knoxville hotel is reflected in the statement of operations through May 1994,
the date the Company-owned hotel was sold to an affiliated partnership.
Hotel revenues of $2,687,484 for the nine months ended September 30, 1995
represented a $439,867 decrease compared to the same period of 1994. Hotel
revenues from the two hotels owned by consolidated affiliates increased
$180,400 for the nine months; the offsetting decrease resulted from the
disposition of the Knoxville hotel in May 1994. The increased revenues of the
two hotels owned by consolidated affiliates resulted from a combined increase
in occupancy and average room rates for the period. Hotel revenues for the
third quarter of 1995 represented a 3.3% increase compared to the same quarter
in 1994 due to the increased performance at the two hotels owned by
consolidated affiliates.
Hotel costs and expenses of $1,322,526 for the nine months ended September 30,
1995 represented a $288,362 decrease compared to the same period of 1994.
Hotel costs and expenses from the two hotels owned by consolidated affiliates
increased $67,093 for the period, due primarily to the increase in the number
of rooms sold, and the offsetting decrease resulted from the disposition of
the Knoxville hotel in May 1994. Hotel costs and expenses for the third
quarter of 1995 represented a 4.8% increase compared to the same quarter in
1994 due to the increase in the number of rooms sold at the two hotels owned
by consolidated affiliates.
Hotel depreciation and amortization expense decreased $122,804 for the nine
months ended September 30, 1995 compared to the same period of 1994 due
primarily to the Knoxville hotel disposition in May 1994. Hotel depreciation
and amortization includes $218,421 for the nine months ended September 30,
1995, relating to the two hotels owned by consolidated affiliates.
Corporate Operations
The increase in management and franchise fee income for the three and nine
month periods ended September 30, 1995 compared to the same periods in 1994 is
due to increased revenues at the partnership owned hotels and the recognition
of fees beginning in May 1994 from the partnership owned Knoxville hotel,
offset slightly by fees earned from non-affiliates under short-term agreements
which expired in late 1994. For the nine months ended September 30, 1995
compared to the same nine-month period in 1994 chainwide occupancy decreased
one percentage point and average daily rate increased 4.7%. The hotel
industry experienced continued improvement compared to the same nine months
in 1994 and industry wide occupancies are expected to continue to improve
throughout 1995. While the industry room demand growth rate is increasing
faster than the supply of new rooms, substantially all hotel markets where
Signature Inns are located are experiencing new hotel rooms opening, under
construction or in the planning stages. Hotel occupancies at certain of the
partnership-owned hotels may be negatively impacted which could negatively
effect the Company's management and franchise fee revenue.
General and administrative expenses for the three and nine month periods ended
September 30, 1995 compared to the same period in 1994 increased due to
increased employee compensation and legal costs.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Other Income (Deductions)
Equity in income of hotel limited partnerships represents the Company's share
of the unconsolidated hotel partnerships' income or loss. The decrease for
the nine month period ended September 30, 1995 compared to the same period in
1994 of $51,472 is attributable to the Company's $117,913 share of a one time
gain resulting from a partnership's debt restructuring in June 1994, offset
partially by increased hotel partnership income and increased ownership in
one parntership owned hotel.
The increase in interest income for the three and nine month periods ended
September 30, 1995 compared to the same period in 1994 is a result of higher
investable cash balances earning a higher yield and interest income earned
from the Company's loans to affiliated hotel partnerships. Interest income
includes $48,018 and $34,820 on loans to affiliated hotel partnerships for the
nine months ended September 30, 1995 and 1994, respectively.
Interest expense for the three and nine month periods ended September 30, 1995
compared to the same period in 1994 decreased due to decreased average
outstanding indebtedness during the respective periods, offset slightly by
higher average interest rates. Interest ceased on the $4.9 million Knoxville
hotel loan upon the sale of the hotel in May 1994.
As described in NOTE B, the Company terminated the capital appreciation fee
arrangement in exchange for a single cash payment of $900,000 on September 1,
1995. Through June 30, 1995, $745,651 of related expense was accrued
representing the estimated amount due the lender based on the negotiated
payment. An additional $154,349 of related expense was charged to operations
in the third quarter of 1995.
In August 1995, the Company sold its easement rights to a billboard to a
billboard company for approximately $165,000.
Capital Resources and Liquidity
The Company believes that the cash generated from management and franchising
activities and its return on hotel partnership investments, along with
additional borrowing capabilities and its cash investments will provide
adequate liquidity to meet its operating needs and the payment requirements of
its corporate obligations over the next twelve months.
At September 30, 1995, a $3.1 million non-recourse hotel mortgage loan of a
consolidated hotel affiliate is reflected as a long-term liability in the
consolidated financial statements. The Company is in the process of
refinancing this mortgage loan. Based upon preliminary commitments received
the Company anticipates completing such refinancing prior to the December
maturity.
In October the Company entered into a partnership agreement with a joint
venture partner; approximately $400,000 of cash was contributed by the
Company for a 40% equity interest in the new partnership.
<PAGE>
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
See note below
Item 2. Changes in Securities
See note below
Item 3. Default upon Senior Securities
See note below
Item 4. Submission of matters to Vote of Security Holders
See note below
Item 5. Other Information
See note below
Item 6. Exhibits and Reports on Form 8-K
See note below
NOTE: The response to each of the above items is not
applicable or is in the negative and does not require a
response pursuant to the instructions.
<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 thereunto duly authorized.
SIGNATURE INNS, INC.
Date November 10, 1995 By
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John D. Bontreger, President and C.E.O.
Date November 10, 1995 By
----------------- ---------------------------------------
Mark D. Carney, Vice President Finance
and C.F.O.
Date November 10, 1995 By
----------------- ---------------------------------------
Martin D. Brew, Treasurer/Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Statement and Consolidated Statement of Operations of
Signature Inns, Inc. as of and for the three month period ended September 30,
1995, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,448,523
<SECURITIES> 0
<RECEIVABLES> 565,309
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,013,832
<PP&E> 9,836,949
<DEPRECIATION> 3,435,171
<TOTAL-ASSETS> 14,690,504
<CURRENT-LIABILITIES> 1,244,477
<BONDS> 8,796,688
<COMMON> 4,432,676
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,690,504
<SALES> 0
<TOTAL-REVENUES> 1,952,610
<CGS> 0
<TOTAL-COSTS> 1,044,157
<OTHER-EXPENSES> 129,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234,973
<INCOME-PRETAX> 901,556
<INCOME-TAX> 0
<INCOME-CONTINUING> 901,556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 901,556
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
