UNITED STATES
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 March 31, 1995
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 1-9496
Boddie-Noell Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 56-1574675
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3710 One First Union Center, Charlotte, NC 28202
(Address of principal executive offices)
(Zip Code)
704/333-1367
(Registrant's telephone number, including area code)
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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of April 30, 1995 (the
latest practicable date).
Common Stock, $0.01 par value 3,005,240
(Class) (Number of shares)
<PAGE>
BODDIE NOELL PROPERTIES, INC.
TABLE OF CONTENTS
Item No. Page No.
PART I - Financial Information
1 Financial Statements 3
2 Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8
PART II - Other Information
6 Exhibits and Reports on Form 8-K 12
<PAGE>
PART I
Item 1. Financial Statements
BODDIE-NOELL PROPERTIES, INC.
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Real estate investments at cost:
Restaurant properties $ 43,205,075 $ 43,205,075
Apartment properties 54,848,188 54,723,503
98,053,263 97,928,578
Less accumulated depreciation (7,368,948) (6,827,337)
90,684,315 91,101,241
Cash and cash equivalents 582,412 952,363
Rent and other receivables 337,937 493,306
Other assets, net of applicable amortization:
Intangible related to property management operations 2,387,097 2,318,335
Deferred acquisition costs 291,074 255,999
Deferred financing costs 461,220 466,217
Prepaid expenses and other assets 601,869 366,753
Total assets $ 95,345,924 $ 95,954,214
Liabilities and Shareholders' Equity
Mortgage and other notes payable $ 59,738,115 $ 59,827,256
Notes payable to affiliates 7,056,300 7,056,300
Deferred acquisition and financing costs payable - 91,000
Accounts payable and accrued expenses 846,197 785,886
Escrowed security deposits and deferred revenue 226,856 225,863
Total liabilities 67,867,468 67,986,305
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares authorized,
2,994,702 shares issued and outstanding at March 31, 1995,
2,990,990 shares issued and outstanding at December 31, 1994 29,947 29,910
Additional paid-in-capital 33,502,222 33,452,611
Dividends distributed in excess of net income (6,053,713) (5,514,612)
Total shareholders' equity 27,478,456 27,967,909
Total liabilities and shareholders' equity $ 95,345,924 $ 95,954,214
</TABLE>
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Operations
(Unaudited)
Three months ended March 31
1995 1994
Revenues
Restaurant rental income $ 1,074,371 $ 1,141,014
Apartment rental income 2,061,429 550,840
Management fees 210,603 -
Interest and other income 6,779 1,546
3,353,182 1,693,400
Expenses
Depreciation 547,296 281,388
Amortization 110,121 37,128
Apartment operations 617,351 168,154
Property management fees - 28,262
Administrative 363,752 105,375
Advisory fees - 44,025
Interest 1,326,556 444,829
2,965,076 1,109,161
Net income $ 388,106 $ 584,239
Net income per share $ 0.13 $ 0.20
Weighted average number of shares outstanding 2,991,031 2,850,000
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Shareholders' Equity
For the Three Months ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Dividends
Additional distributed
Common Stock paid-in in excess of
Shares Amount capital net income Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 2,990,990 $ 29,910 $ 33,452,611 $ (5,514,612) $ 27,967,909
Net income 388,106 388,106
Common stock issued 3,712 37 49,611 49,648
Dividends paid ($.31 per share) (927,207) (927,207)
Balance at March 31, 1995 2,994,702 $ 29,947 $ 33,502,222 $ (6,053,713) $ 27,478,456
</TABLE>
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Statements of Cash Flows
(Unaudited)
Three months ended March 31,
1995 1994
Cash flows from operating activities
Net income $ 388,106 $ 584,239
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation and amortization 657,417 318,516
Changes in operating assets and liabilities:
Rent and other receivables 155,369 120,192
Prepaid expenses and other assets (234,056) 85,596
Accounts payable and accrued expenses (31,708) (26,722)
Escrowed security deposits and deferred revenue (5,752) (1,325)
Net cash provided by operating activities 929,376 1,080,496
Cash flows from investing activities
Additions to apartment properties (108,018) (1,013)
Payment of deferred acquisition and financing costs (174,961) (264,705)
Net cash used in investing activities (282,979) (265,718)
Cash flows from financing activities
Payment of dividends (927,207) (883,500)
Proceeds from notes payable - 250,000
Principal payments on notes payable (89,141) (28,760)
Net cash used in financing activities (1,016,348) (662,260)
Increase (decrease) in cash and cash equivalents (369,951) 152,518
Cash and cash equivalents at beginning of period 952,363 121,530
Cash and cash equivalents at end of period $ 582,412 $ 274,048
<PAGE>
BODDIE-NOELL PROPERTIES, INC.
Notes to Financial Statements
March 31, 1995
(Unaudited)
Note 1. Interim financial statements
The accompanying financial statements of Boddie-Noell Properties,
Inc. (the Company) have not been audited by independent
accountants, except for the balance sheet at December 31, 1994.
In the opinion of the Company's management, all adjustments
(consisting of normal recurring accruals) necessary for a fair
presentation of the financial position and results of operations
for the periods presented have been included.
Certain notes and other information have been condensed or
omitted from the interim financial statements presented in this
Quarterly Report on Form 10-Q. Therefore, these financial
statements should be read in conjunction with the Company's 1994
Annual Report on Form 10-K.
The results for the first quarter of 1994 are not necessarily
indicative of future financial results.
Note 2. Subsequent declaration of dividend
On April 18, 1995 the Company declared a cash dividend of $0.31
per share, which will be paid on May 15, 1995 to shareholders of
record on May 1, 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
Boddie-Noell Properties, Inc., formerly known as Boddie-Noell
Restaurant Properties, is a Delaware corporation organized in
April, 1987. From its inception through 1992, the Company's
investment strategy was limited to the purchase and ownership of
47 restaurant properties leased on a triple net basis to Boddie-
Noell Enterprises ("BNE"). During this period the Company
operated as an advised real estate investment trust ("REIT").
In 1993 the Company embarked on a plan to diversify its assets
and to reorganize as a self-administered, self-managed REIT with
an emphasis on apartment properties. The Company acquired its
first apartment property in June, 1993, and in 1994 the Company
acquired 3 apartment communities and BT Venture Corporation
("BTVC"), a fully integrated apartment management and
development company. As a result of these acquisitions, the
Company now owns 47 restaurant properties and 4 apartment
communities containing a total of 1,130 apartments. The Company
also manages 3 shopping centers and an additional 10 apartment
communities containing a total of 1,947 apartments. The Company
now operates as a self-administered, self-managed REIT with over
80 employees experienced in the acquisition, development,
management and finance of apartment communities.
The following discussion should be read in conjunction with the
financial statements and notes thereto included in this Quarterly
Report on Form 10-Q and with the Company's audited financial
statements and notes thereto included in the Company's 1994
Annual Report on Form 10-K.
Results of Operations
Revenues. For the quarter ended March 31, 1995 the Company's
revenues totaled $3,353,000, increasing 98 percent from the
$1,693,000 realized in the first quarter of 1994. The increase
is primarily attributable to the addition of 3 apartment
communities and property management activities since June, 1994.
The Company's revenues come from two primary sources - restaurant
rental payments and apartment rental income.
Restaurant rental payments are comprised of minimum rent
($288,286 per month) and percentage rent (equal to 9.875 percent
of net sales of the related restaurant properties less minimum
rent payments). Restaurant rental revenue of $1,074,000 through
March 31, 1995 (a decline of approximately 6 percent from the
previous year first quarter) reflects the continued impact of
heavy competition in the fast food restaurant industry throughout
North Carolina and Virginia.
Apartment rental revenue totaled $2,061,000 in first quarter,
1995 compared to $551,000 in first quarter, 1994, reflecting the
addition of Oakbrook, Latitudes, and Harris Hill apartments in
June, October, and December, 1994, respectively. Revenue at
Paces Commons (the only apartment property that was owned during
both the first quarter of 1995 and 1994) totaled $600,000 in
first quarter, 1995, an increase of 9 percent over prior year.
Average occupancy and average revenue per unit of the apartments
continues to be high. Summary amounts for the quarter ended
March 31, 1995 are as follows:
Average Average
Number Economic Monthly Revenue
of Units Occupancy per Unit
Charlotte, North Carolina
Harris Hill Apartments 184 95% $651
Oakbrook Apartments 162 98% 728
Paces Commons Apartments 336 95% 629
Virginia Beach, Virginia
Latitudes Apartments 448 96% 597
<PAGE>
Summary amounts for Paces Commons for the quarter ended March 31,
1994 were average economic occupancy of 93 percent and average
monthly revenue per unit of $580.
In addition, the Company now receives property management and
administrative fees arising from the management contracts it
obtained as part of the acquisition of BTVC in October, 1994.
These fees totaled approximately $211,000 in first quarter, 1995.
Expenses. Depreciation and amortization totaled $657,000 for the
three months ended March 31, 1995 compared to $319,000 for the
same period in 1994. The significant increase is due primarily
to additions of apartment properties totaling approximately $40
million in later quarters of 1994 along with the $2.3 million
intangible related to property management operations acquired in
October, 1994.
Apartment operating expenses totaled approximately $617,000 in
first quarter, 1995 compared to $168,000 in first quarter, 1994,
again reflecting additions of apartment properties. Through
March, 1995 these expenses are generally consistent with budgets
and management's expectations. Operating expenses relating to
the restaurants are insignificant because of the restaurant
properties' triple net lease arrangements.
Administrative expenses totaled $364,000 through March, 1995
compared to $178,000 administrative and property management and
advisory fees expenses in first quarter, 1994. This increase
reflects the property management activities assumed in late 1994,
net of the savings related to property management and advisory
fees which are no longer paid since the Company is self-managed.
Interest expense of $1,327,000 in first quarter, 1995 compared to
$445,000 in the same period in 1994 again reflects the effect of
approximately $40 million debt assumed in conjunction with 1994
acquisitions in later quarters of 1994. The weighted average
interest rate in first quarter of 1995 was approximately 7.9
percent compared to approximately 6.6 percent in first quarter of
1994.
Summary results of operations. Funds from operations ("FFO")
is defined by the National Association of Real Estate Investment
Trusts as "net income (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from
debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated
partnerships and joint ventures." The Company considers FFO in
evaluating property acquisitions and its operating performance
and believes that FFO should be considered along with, but not as
an alternative to, net income and cash flows as a measure of the
Company's operating performance and liquidity. FFO does not
represent cash generated from operating activities in accordance
with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs.
A reconciliation of net income, funds from operations, and net
cash provided by operating activities through March 31, along
with related per share amounts, is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C> <C> <C>
Net income $ 388,106 $0.13 $ 584,239 $0.20
Depreciation 547,296 281,388
Amortization of intangible related to
property management operations 56,238 -
Amortization of deferred financing costs 53,883 37,128
Funds from operations 1,045,523 0.35 902,755 0.32
Changes in operating assets and liabilities (116,147) 177,741
Net cash provided by operating activities $ 929,376 0.31 $1,080,496 0.38
</TABLE>
Consistent with the Company's long-term growth strategy, funds
from operations increased approximately 16 percent, in spite of
decreased restaurant rental revenue, as a result of apartment
property acquisitions. As expected, net income for the same
period decreased approximately 34 percent, reflecting the effect
of depreciation
<PAGE>
and amortization of assets related to those acquisitions. The
decrease in net cash provided by operating activities results
primarily from the impact of a $187,000 fully refundable deposit
paid in March, 1995 for fixed rate financing of Harris Hill Apartments.
Liquidity and Capital Resources
Capital resources. As of March 31, 1995 the Company's total
book capitalization was $94,272 ,000, comprised of $27,478,000 of
shareholders' equity and $66,794,000 of debt. In March, 1995 the
Company issued 3,712 shares of common stock (valued at $49,648)
to the former shareholders of BTVC in conjunction with the earn-
out provision of that acquisition agreement. In addition,
subsequent to March 31, 1995 the Company will issue 10,538 shares
of common stock (valued at $141,667) to the former BTVC
shareholders as additional consideration earned during the first
quarter 1995 under the earn-out provision. There were no
changes in debt structure during the first quarter of 1995.
The Company has obtained a commitment to extend the maturity date
of the current Credit Facility to April, 1996 (previously June,
1995) and to increase the amount of the facility to $24 million
(from $20 million). As a result, the Company will add four
additional restaurants to the related deed of trust and security
agreement, and BNE has agreed to add four additional restaurants
to the related purchase agreement (these agreements currently
cover 20 restaurants). The Company intends to draw an additional
$4 million against this line to pay the final installment on its
original restaurant mortgage loan at its maturity in June, 1995.
Management is committed to reducing the Company's exposure
related to variable rate debt, and expects to complete
refinancing of the current variable rate mortgage debt related to
Harris Hill Apartments to a 8.6 percent fixed rate mortgage
during second quarter of 1995.
The success of operation of the Company's restaurants is
dependent upon BNE, which in turn depends partly on its own
liquidity and capital resources to meet its master lease,
revolving line of credit and purchase obligations. BNE is able
to fund most of its own liquidity and capital resources through
cash generated from operations with additional funding provided
through long-term facilities.
Cash flows and liquidity. The Company's cash and cash
equivalents decreased by $370,000 during the three-month period
ended March 31, 1995. Cash flows from operating activities
decreased by 14%, or $141,000, to $939,000 during first quarter,
1995 compared to first quarter, 1994; however,
$187,000 was used for payment of a refundable deposit (classified
as a current, operating asset at March 31, 1995) related to the
anticipated Harris Hill refinancing. Funds from operations improved
compared to prior year (see discussion above).
There were no significant unusual investing or financing
activities during the first three months of 1995. Net cash used
in investing activities totaled $283,000 (compared to $266,000
used in first quarter, 1994), including $108,000 for capital
additions and improvements to apartment properties (see
discussion below) and $175,000 payments of acquisition and
financing costs (including $91,000 costs related to 1994
acquisitions and previously accrued in 1994). Net cash used in
financing activities totaled $1,016,000, including $927,000
payment of regular quarterly dividends and $89,000 principal
payments on notes payable in the normal course of business.
There were no draws on the credit facility during the first
quarter of 1995 ($250,000 was drawn during the same period in
1994).
The Company expects to meet its short-term liquidity requirements
generally through net cash provided by operations and utilization
of credit facilities. The Company believes that net cash
provided by operations will be adequate and anticipates that it
will continue to be adequate to meet both operating requirements
and payment of dividends in accordance with REIT requirements in
both the short and the long term. The Company anticipates
funding its acquisition activities, if any, primarily by using
short-term credit facilities or secured debt. The Company
expects to meet certain of its long-term liquidity requirements
through long-term secured and unsecured borrowings and the
issuance of debt securities or additional equity securities. The
Company believes that it has sufficient resources to meet its
short- and long-term liquidity requirements.
<PAGE>
Capitalization of fixed assets and property improvements. The
Company has established a policy of capitalizing those
expenditures relating to acquiring new assets, materially
enhancing the value of an existing asset, or substantially
extending the useful life of an existing asset. Carpet, vinyl,
and wallpaper replacements are generally expensed as incurred,
except when those replacements are made in conjunction with a
plan of acquisition.
Capitalized property additions, replacements and improvements
through March 31 are summarized as follows:
1995 1994
Capitalized carpet, vinyl, and
wallpaper replacements $ 17,115 $ -
Other property additions 90,903 1,013
108,018 1,013
Allocation of BTVC purchase price additional
consideration earned first quarter, 1995 16,667 -
$124,685 $1,013
Inflation. Management does not believe that inflation poses a
material risk to the Company. Leases of the Company's apartment
properties are short-term in nature, the majority for terms of
one year or less, with none longer than two years. All apartment
leases allow, at the time of renewal, for adjustments in the rent
payable thereunder and thus enable the Company to seek increases
in rents to compensate for increases in expenses brought about by
inflation. In addition, the apartment lease agreements give the
Company the right to terminate any lease at the end of its term
on sixty days notice. The restaurant properties are leased on a
triple-net basis, which places the risk of rising operating and
maintenance cost on the lessee.
<PAGE>
PART II
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit 11 Computation of per share earnings
Exhibit 27 Financial data schedule (electronic filing)
b) Reports on Form 8-K:
The Company filed an Amendment No. 1 to its Current Report on
Form 8-K as of December 28, 1994 to provide required audited
and pro forma financial statement information responsive to
Item 7 related to the acquisition of Harris Hill Apartments.
The date of this amended filing was February 21, 1995.
<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.
BODDIE-NOELL PROPERTIES, INC.
(Registrant)
May 12, 1995 /s/ Philip S. Payne
Philip S. Payne
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer)
May 12, 1995 /s/ Pamela B. Novak
Pamela B. Novak
Vice President - Controller
(Chief Accounting Officer)
BODDIE-NOELL PROPERTIES, INC.
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Price # SHARES Total Amt.
<S> <C> <C> <C>
Common shares outstanding:
January 1 - March 30 2,990,990
March 31 2,994,702
Weighted average 2,991,031
Common stock equivalents:
Options granted October 17, 1994 $ 13.75 160,000
Other potentially dilutive securities: none
Assumed exercise of options @ January 1 13.75 160,000 $ 2,200,000
Assumed purchase of treasury stock w/proceeds
Average price of stock (per AMEX reports)
January 12.76
February 12.95
March 13.43
Overall average $ 13.05 (168,625) (2,200,000)
Assumed increase(decrease) in # shares/equity $ (8,625) $ -
Weighted average # shares outstanding 2,991,031
Assumed # shares for calculation of
earnings per common and common equivalent share 2,982,406
Net income, three months ended March 31, 1995 $ 388,106
Earnings per share, weighted average common shares outstanding $ 0.1298
Earnings per common and common equivalent share 0.1301
Dilution percentage -0.29%*
</TABLE>
* Reduction of less than 3% in the aggregate is not considered dilution;
financial statement presentation of fully diluted earnings per share is
not required. Primary earnings per share is presented based on weighted
average number of common shares outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BODDIE-NOELL PROPERTIES, INC. FINANCIAL STATEMENTS AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 583,412
<SECURITIES> 0
<RECEIVABLES> 361,524
<ALLOWANCES> (23,587)
<INVENTORY> 0
<CURRENT-ASSETS> 1,522,218
<PP&E> 98,053,263
<DEPRECIATION> (7,368,948)
<TOTAL-ASSETS> 95,345,924
<CURRENT-LIABILITIES> 1,073,053
<BONDS> 66,794,415
<COMMON> 29,947
0
0
<OTHER-SE> 27,448,509
<TOTAL-LIABILITY-AND-EQUITY> 95,345,924
<SALES> 0
<TOTAL-REVENUES> 3,382,954
<CGS> 0
<TOTAL-COSTS> 1,274,768
<OTHER-EXPENSES> 363,752
<LOSS-PROVISION> 29,772
<INTEREST-EXPENSE> 1,326,556
<INCOME-PRETAX> 388,106
<INCOME-TAX> 0
<INCOME-CONTINUING> 388,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 388,106
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0
</TABLE>
