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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 June 30, 1996 Commission File Number 0-9659
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SIGNATURE INNS, INC.
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(Exact name of registrant as specified in its charter)
Indiana 35-1426996
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (317) 581-1111
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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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7,785,994 Common Shares were outstanding as of August 12, 1996.
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SIGNATURE INNS, INC.
INDEX
Part I - FINANCIAL INFORMATION Page
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Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations 1
Three and six months ended June 30, 1996 and 1995
Consolidated Balance Sheets 2
June 30, 1996 and December 31, 1995
Consolidated Statements of Shareholders' Equity 3
Six months ended June 30, 1996 and
Year ended December 31, 1995
Consolidated Statements of Cash Flows 4
Six months ended June 30, 1996 and 1995
Note to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
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Part II - OTHER INFORMATION 8
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SIGNATURES 9
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Signature Inns, Inc.
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Six Months Ended
June 30, June 30,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Revenues:
Hotel revenues $1,392,051 905,215 2,528,819 1,659,126
Management and franchise fees 845,415 848,885 1,523,990 1,480,808
--------- --------- --------- ---------
2,237,466 1,754,100 4,052,809 3,139,934
--------- --------- --------- ---------
Costs and expenses:
Hotel costs and expenses 689,494 440,755 1,366,578 845,411
Hotel depreciation and amortization 96,819 65,439 194,163 130,878
General and administrative expenses 632,334 540,182 1,257,518 1,121,498
Other depreciation and amortization 22,800 28,086 49,767 55,953
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1,441,447 1,074,462 2,868,026 2,153,740
--------- --------- --------- ---------
Operating income 796,019 679,638 1,184,783 986,194
--------- --------- --------- ---------
Other income (deductions):
Equity in income of hotel limited
partnerships, net 303,159 305,488 323,523 300,970
Interest income 51,567 68,408 104,585 116,803
Interest expense - hotels (233,553) (158,456) (460,777) (317,002)
Interest expense - corporate (27,622) (95,430) (70,644) (199,757)
Capital appreciation fee - (231,523) - (456,641)
Other partners' equity in income (118,794) (66,888) (172,219) (103,556)
Other 8,283 16,441 16,546 30,299
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(16,960) (161,960) (258,986) (628,884)
--------- --------- --------- ---------
Net income $ 779,059 517,678 925,797 357,310
========= ========= ========= =========
Earnings per share $ 0.10 O.07 0.12 0.05
========= ========= ========= =========
Weighted average common
shares outstanding 7,785,078 7,784,827 7,784,703 7,783,827
========= ========= ========= =========
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Signature Inns, Inc.
Consolidated Balance Sheets
(Unaudited)
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June 30, December 31,
1996 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Corporate $ 1,007,779 1,213,078
Consolidated hotels 1,258,987 1,402,047
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2,266,766 2,615,125
Other current assets 726,023 500,492
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Total current assets 2,992,789 3,115,617
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Hotel limited partnerships:
Equity investments 1,774,883 2,224,857
Receivables, net 3,491,648 3,571,648
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5,266,531 5,796,505
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Property and equipment, net 8,663,320 8,763,787
Deferred costs and other assets,
net of accumulated amortization
of $541,178 and $530,114 524,871 338,542
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$ 17,447,511 18,014,451
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt:
Corporate - 533,340
Consolidated hotels 225,239 3,188,376
Accounts payable and other
accrued liabilities 757,549 822,961
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Total current liabilities 982,788 4,544,677
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Long-term debt, less current portion:
Corporate 1,400,000 2,166,660
Consolidated hotels 9,003,107 6,471,734
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10,403,107 8,638,394
Other partners' equity 134,051 40,154
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Total liabilities 11,519,946 13,223,225
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Shareholders' equity:
Common stock, no par value.
Authorized 50,000,000 shares
and 20,000,000 shares. 10,016,515 9,805,973
Accumulated deficit (4,088,950) (5,014,747)
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Total shareholders' equity 5,927,565 4,791,226
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$ 17,447,511 18,014,451
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Signature Inns, Inc.
Consolidated Statements of Shareholders' Equity (Unaudited)
Common Stock Accumulated
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Shares Amount Deficit Total
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<S> <C> <C> <C> <C>
Balance at December 31, 1994 7,784,327 9,736,348 (6,632,163) 3,104,185
Net income - - 1,617,416 1,617,416
Collection of notes receivable - 69,625 - 69,625
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Balance at December 31, 1995 7,784,327 9,805,973 (5,014,747) 4,791,226
Net income - - 925,797 925,797
Collection of notes receivable - 208,875 - 208,875
Common shares issued 1,667 1,667 - 1,667
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Balance at June 30,1996 7,785,994 $10,016,515 (4,088,950) 5,927,565
========= ========== ========= =========
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Signature Inns, Inc.
Consolidated Statements of Cash Flows (Unaudited)
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Six Months ended June 30 1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 925,797 357,310
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 244,455 186,831
Equity in income of hotel limited
partnerships, net of distributions
received of $783,761 and $717,947 460,238 416,977
Other partners' equity in income 172,219 103,556
Capital appreciation fee - 456,641
Other items (234,328) (76,387)
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Net cash provided by operating activities 1,568,381 1,444,928
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Cash flows from investing activities:
Property and equipment additions (130,258) (69,930)
Repayment of receivables from
hotel limited partnerships, net 80,000 19,000
Deferred costs and other assets (265,268) (59,153)
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Net cash used by investing activities (315,526) (110,083)
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Cash flows from financing activities:
Repayments of long-term debt (2,031,764) (5,451)
Net borrowings (repayments) on
revolving line of credit 300,000 (1,000,000)
Proceeds from issuance of common stock- 208,875 69,625
Distributions to other partners by
consolidated hotel, net (78,325) (123,053)
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Net cash used by financing activities (1,601,214) (1,058,879)
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Net increase (decrease) in cash and cash equivalents (348,359) 275,966
Cash and cash equivalents at beginning of period 2,615,125 2,035,513
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Cash and cash equivalents at end of period $ 2,266,766 2,311,479
========== =========
Supplemental information:
Interest paid $ 536,196 525,820
========== =========
Income taxes paid $ 26,000 11,500
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SIGNATURE INNS, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1996
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, 1996. 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, 1995.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Hotel Operations
Hotel operations of three hotels owned by consolidated affiliates
(Indianapolis South, Indianapolis East and Elkhart) are included in the
statement of operations for the six months ended June 30, 1996. Effective
December 29, 1995, the operating results of Indianapolis East are included in
the statement of operations; prior to that date the Company's share of net
income was reflected as equity in income of hotel limited partnerships.
Hotel revenues of $2,528,819 for the six months ended June 30, 1996
represented a 52.4% increase compared to the same period of 1995. Hotel
revenues from Indianapolis South and Elkhart increased $47,754 for the period,
with the remainder of the increase attributable to the consolidation of
Indianapolis East. The increased revenues of Indianapolis South and Elkhart
resulted from an increase in average room rates. Hotel revenues for the
second quarter of 1996 represented a 53.8% increase compared to the same
quarter in 1995 due primarily to the consolidation of Indianapolis East.
Hotel costs and expenses for the six months ended June 30, 1996 represented a
$521,167 increase compared to 1995. Hotel costs and expenses from
Indianapolis South and Elkhart increased $98,160 for the period, with the
remainder of the increase attributable to the consolidation of Indianapolis
East. Hotel costs and expenses for the second quarter of 1996 represented a
56.4% increase compared to the same quarter of 1995 due primarily to the
consolidation of Indianapolis East.
Hotel depreciation and amortization expense increased $63,285 for the six
months ended June 30, 1996 compared to 1995 due primarily to the
consolidation of Indianapolis East.
Corporate Operations
Management and franchise fees increased $43,182 for the six months ended June
30, 1996 compared to the same quarter of 1995. The increase in fee income is
due to increased revenues during the first six months of 1996 compared to 1995
at the unconsolidated partnership owned hotels. For the first six months of
1996, these twenty hotels increased revenues $628,000, or 3.9%, due to average
daily rate increases.
General and administrative expenses for the three and six months ended June
30, 1996 increased due to increased employee compensation costs.
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Other Income (Deductions)
Equity in income of hotel limited partnerships represents the Company's share
of the unconsolidated partnerships' income or loss. The increase of $22,553
for the six months ended June 30, 1996 compared to 1995 is attributable to
increased profitability of the partnership owned hotels in 1996 and an
increased ownership percentage in one hotel.
Interest income for the three and six months ended June 30, 1996 decreased
compared to 1995 as a result of lower interest income from invested cash
balances.
Interest expense - hotels increased for the quarter and six months ended June
30, 1996 compared to 1995 due to the consolidation of Indianapolis East. The
consolidated affiliate loan classified as current at December 31, 1995 was
restructured in June 1996 after reaching an agreement with the current lender.
Interest expense - corporate for the three and six months ended June 30, 1996
decreased compared to 1995 due to decreased average outstanding indebtedness,
and a decrease in the interest rates on the Company's borrowing arrangements.
In May 1996, the bank term note with an outstanding balance of $1,422,220 was
paid in full. Simultaneous with this paydown, the company's available line
of credit was increased to $3.1 million with interest at prime plus one-half
percent.
The Company satisfied the Capital Appreciation Fee arrangement on September 1,
1995. During the six months ended June 30, 1995, related expense of $456,641
was recorded using a present value estimate of the amount due the lender.
Capital Resources and Liquidity
The Company believes that the cash generated from management and franchising
activities and hotel limited partnership investments, along with cash balances
will provide adequate liquidity to meet its operating needs and the payment
requirements of its corporate obligations over the next twelve months.
Additionally, the Company has borrowing capabilities under its existing $3.1
million bank line of credit agreement.
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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 a Vote of Security Holders
May 21, 1996 Annual Meeting of Shareholders
Matters voted on (out of 7,784,327 eligible shares):
(i) Election of three directors for three year terms
5,576,354 for; 125,287 abstain
(ii) Approval of the proposal to amend Article V and VI
of the Company's Articles of Incorporation
5,098,959 for; 250,988 against; 97,013 abstain
(iii) Approval of the 1996 Equity Incentive Plan
5,061,534 for; 281,667 against; 119,171 abstain
(iv) Approval of independent auditors for the year
ending December 31, 1995
5,594,075 for; 46,383 against and 61,183 abstain
Item 5. Other information
See note below
Item 6. Exhibits and Reports on Form 8-K
See note below
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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.
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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 August 13, 1996 By
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John D. Bontreger, President and C.E.O.
Date August 13, 1996 By
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Mark D. Carney, Vice President Finance
and C.F.O.
Date August 13, 1996 By
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Martin D. Brew, Treasurer/Controller
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<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 fiscal quarter ended June 30, 1996,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,266,766
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,992,789
<PP&E> 13,919,319
<DEPRECIATION> 5,255,999
<TOTAL-ASSETS> 17,447,511
<CURRENT-LIABILITIES> 982,788
<BONDS> 10,403,107
0
0
<COMMON> 10,016,515
<OTHER-SE> (4,088,950)
<TOTAL-LIABILITY-AND-EQUITY> 17,447,511
<SALES> 0
<TOTAL-REVENUES> 2,237,466
<CGS> 0
<TOTAL-COSTS> 1,441,447
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 261,175
<INCOME-PRETAX> 779,059
<INCOME-TAX> 0
<INCOME-CONTINUING> 779,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 779,059
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
