SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 23, 1997
BUCKHEAD AMERICA CORPORATION
(Exact name of registrant as specified in charter)
Commission File Number 0-22132
Delaware 58-2023732
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation)
4243 Dunwoody Club Drive,
Suite 200 30350
Atlanta, Georgia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number including area code (770) 393-2662
(Former name or former address, if changed since last report) Not Applicable
496453.1
<PAGE>
Explanatory Note: On October 8, 1997, Buckhead America Corporation (the
"Registrant" or the "Company") filed with the Securities and Exchange Commission
(the "Commission") a Report on Form 8-K (the "Initial 8-K Report") with respect
to the Registrant's merger of Hatfield Inns, LLC, a Delaware limited liability
company ("Hatfield") with and into BLM-RH, Inc., a Delaware corporation
wholly-owned by the Registrant, pursuant to the terms of an Agreement of Merger
dated March 11, 1997.
In accordance with Item 7(a)(4) of Form 8-K, the Initial 8-K Report did
not include the historical Hatfield financial statements or the condensed
consolidated pro forma financial information of the Registrant (the "Financial
Information") and instead contained an undertaking to file the Financial
Information with the Commission in an amendment to the Initial 8-K Report as
soon as practicable, but not later than 60 days after October 8, 1997. On
December 8, 1997, the Registrant filed Amendment No. 1 on Form 8-K/A for the
purpose of satisfying the Registrant's undertaking to file the Financial
Information. The Registrant is hereby filing Amendment No. 2 to the Form 8-K to
correct certain typographical errors. This Amendment No. 2 should be read in
conjunction with the Initial 8-K Report.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
On January 1, 1997, Hatfield Inn, Inc. ("Predecessor") was merged into
Hatfield. The financial statements included herein reflect the operation of the
Predecessor through December 31, 1996 and Hatfield beginning January 1, 1997.
The balance sheet of the Predecessor as of December 31, 1996, and the related
statements of income, shareholder's equity (deficit), and cash flows for the
year then ended, together with the related notes and audit report of KPMG Peat
Marwick LLP and the unaudited condensed balance sheet as of June 30, 1997, and
the related unaudited condensed statements of loss and cash flows for the six
months ended June 30, 1997 and 1996, together with the related notes, are
included herein.
496453.1
1
<PAGE>
Independent Auditors' Report
The Board of Directors
Hatfield Inn, Inc.:
We have audited the accompanying balance sheet of Hatfield Inn, Inc. as of
December 31, 1996, and the related statements of income, shareholder's equity
(deficit), and cash flows for the year then ended. These financial statements
are the responsibility of Hatfield Inn, Inc.'s management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hatfield Inn, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
April 11, 1997
Atlanta, Georgia
2
<PAGE>
HATFIELD INN, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
Current assets:
Cash $ 40,320
Accounts receivable (note 3) 87,227
Inventories 43,277
Prepaid expenses 22,374
-----------
Total current assets 193,198
-----------
Hotel property and equipment (notes 2,3, and 4) 8,092,388
Less accumulated depreciation 802,813
-----------
Net hotel property and equipment 7,289,575
-----------
Deferred loan costs, net of accumulated amortization of $8,309 64,869
Other assets 17,397
-----------
$ 7,565,039
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 349,764
Advances from shareholder (note 6) 485,025
Note payable (note 4) 180,000
Current portion of mortgage notes payable (note 3) 221,250
----------
Total current liabilities 1,236,039
Deferred income taxes (note 5) 48,574
Noncurrent portion of mortgage notes payable (note 3) 5,676,019
Advances from affiliate (note 6) 449,421
-----------
Total liabilities 7,410,053
-----------
Shareholder's equity:
Common stock, par value $.15 per share, 1,000 shares
authorized; 1,000 shares issued and outstanding 150
Additional paid-in capital 194,286
Accumulated deficit (39,450)
-----------
Total shareholder's equity 154,986
-----------
Commitments (note 6) $ 7,565,039
===========
See accompanying notes to financial statements.
3
<PAGE>
HATFIELD INN, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
Revenues
Room $ 2,369,090
Other 108,218
------------
Total revenues 2,477,308
Operating expenses:
Direct:
Room 575,599
Other 81,277
General and administrative 377,051
Utilities 133,146
Management fees (note 6) 123,634
Advertising and promotion 91,238
Repairs and maintenance 83,178
Property taxes 70,655
Insurance 53,359
Depreciation and amortization 386,814
------------
Total operating expenses 1,975,951
------------
Income from operations 501,357
Interest expense 495,529
------------
Income before income taxes 5,828
Deferred income tax expense (note 5) 1,601
------------
Net income $ 4,227
============
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
HATFIELD INN, INC.
STATEMENT OF SHAREHOLDER'S EQUITY (DEFICIT)
YEAR ENDED DECEMBER 31, 1996
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED SHAREHOLDER'S
STOCK CAPITAL DEFICIT EQUITY (DEFICIT)
------------ -------------- --------------- -------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1995 $ -- -- (43,677) (43,677)
Contribution of capital through
forgiveness of shareholder's
advances (note 6) 150 356,486 -- 356,636
Liquidating dividends -- (168,000) -- (168,000)
Contribution -- 5,800 -- 5,800
Net Income -- -- 4,227 4,227
------- --------- -------- ---------
Balances at December 31, 1996 $ 150 194,286 (39,450) 154,986
======= ========= ======== =========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
HATFIELD INN, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<S> <C>
Cash flows from operating activities:
Net income $ 4,227
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 386,814
Deferred income tax expense 1,601
Increase in accounts receivable (43,732)
Increase in inventories (6,011)
Increase in prepaid expenses (6,759)
Increase in accounts payable and accrued expenses 185,830
------------
Net cash provided by operating activities 521,970
------------
Cash flows from investing activities:
Additions to hotel property and equipment (1,795,730)
Additions to other assets (17,397)
------------
Net cash used in investing activities (1,813,127)
------------
Cash flows from financing activities:
Repayments of mortgage notes payable (872,579)
Proceeds from mortgage notes payable 1,833,688
Proceeds from note payable 180,000
Capital contribution 5,800
Dividends (168,000)
Repayment of advances from affiliate (227,237)
Proceeds from advances from shareholder 485,025
Deferred loan costs (9,444)
------------
Net cash provided by financing activities 1,227,253
------------
Net decrease in cash (63,904)
Cash at beginning of year 104,224
------------
Cash at end of year $ 40,320
============
Supplemental disclosure of cash flow information - cash paid during the year for
interest, net of interest capitalized of $34,643 $ 489,529
============
Supplemental disclosure of noncash financing activities - contribution of capital
through forgiveness of shareholder's advances (note 6) $ 356,636
============
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) Summary of Significant Accounting Policies
(a) General Information
The financial statements represent the accounts of Hatfield Inn, Inc.
(the "Predecessor" - see note 7). The Predecessor was formed on
February 10, 1992 for the purpose of developing and operating hotel
properties. As of December 31, 1996, the Predecessor owned seven
Hatfield Inns located in Kentucky and Missouri. The sixth hotel was
opened in January 1996 and the seventh was opened in November 1996.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
generally determined using the first-in, first-out method.
(c) Hotel Property and Equipment
Hotel property and equipment are stated at cost. Depreciation of hotel
property and equipment is calculated on the straight-line method over
the following useful lives:
Years
-----
Buildings 39
Land improvements 7
Furniture, fixtures, and equipment 3 to 7
(d) Deferred Loan Costs
Costs incurred to obtain the mortgage notes payable were deferred and
are being amortized on a straight-line basis over the terms of the
loans.
(e) Income Taxes
The Predecessor accounts for income taxes in accordance with the asset
and liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
7
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
(f) Advertising
The cost of advertising is expensed as incurred.
(g) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Predecessor to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(h) Fair Value of Financial Instruments
Management believes that the carrying amounts of cash, accounts
receivable, accounts payable and accrued expenses, advances from
shareholder, note payable, and current portions of mortgage notes
payable are reasonable approximations of their fair value because of
the short maturity of these instruments.
The fair value of the Predecessor's noncurrent portions of mortgage
notes payable is estimated by discounting the future cash flows of each
instrument at rates currently offered to the Predecessor for similar
debt instruments of comparable maturities by the Predecessor's bankers.
Based on this valuation methodology, management believes that the
carrying amount of the noncurrent portions of mortgage notes payable is
a reasonable estimation of its fair value.
(2) Hotel Property and Equipment
The cost basis of hotel property and equipment is summarized as
follows:
Land $ 765,417
Land improvements 537,374
Buildings 5,198,630
Furniture, fixtures, and equipment 1,590,967
---------
$ 8,092,388
=========
8
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
(3) Mortgage Notes Payable
Mortgage notes payable, which are personally guaranteed by the Company's
shareholder, consist of the following:
<TABLE>
<S> <C>
Mortgage note payable to a bank dated August 4, 1992, bearing interest at prime
plus 1% (9.25% at December 31, 1996), payable in 180 monthly installments of
principal and interest. The note is secured by real estate, furniture,
fixtures, equipment, and accounts receivable of a hotel property located in
Central City, Kentucky $ 710,324
Mortgage note payable to a bank dated September 9, 1996, bearing interest at
prime plus 1% (9.25% at December 31, 1996), payable in 59 monthly
installments of principal and interest, with the remaining principal due
September 9, 2001. The note is secured by real estate, furniture, fixtures,
equipment, and accounts receivable of a hotel property located in Sikeston,
Missouri 697,399
Mortgage note payable to a bank dated January 23, 1995, bearing interest at the
yield of five-year U.S. Treasuries plus 3.5% (11.25% at December 31, 1996),
payable in 180 monthly installments of principal and interest. The note is
secured by real estate, furniture, fixtures, equipment, and accounts
receivable of a hotel property located in Lebanon, Kentucky 817,149
Mortgage note payable to a bank dated March 23, 1995, bearing interest at prime
plus 1.5% (9.75% at December 31, 1996), payable in 59 monthly installments of
principal and interest, with the remaining principal due March 20, 2000. The
note is secured by real estate of a hotel property located in Dexter,
Missouri 844,582
Mortgage note payable to a bank dated November 10, 1995, bearing interest at
prime plus 1% (9.25% at December 31, 1996), payable in 180 monthly
installments of principal and interest. The note is secured by real estate,
furniture, fixtures, equipment, and accounts receivable of a hotel property
located in Leitchfield, Kentucky 868,104
Mortgage note payable to a bank dated May 3, 1995, bearing interest at prime
plus 1% (9.25% at December 31, 1996), payable in 240 monthly installments of
principal and interest. The note is secured by real estate of a hotel
property located in Caruthersville, Missouri 1,024,711
Construction mortgage note payable to a bank dated May 6, 1996, originally
bearing interest at prime plus 2% (10.25% at December 31, 1996) with required
monthly interest payments and was scheduled to mature on February 6, 1997.
Hatfield Inns, LLC, the successor to the Company (note 7), refinanced this
note on a long-term basis on February 6, 1997. Accordingly, the balance as of
December 31, 1996 is classified in the accompanying balance sheet as
long-term. The refinanced note bears interest at 9.75% and is payable in 59
monthly installments of principal and interest, with the remaining principal
due February 6, 2002. The note is secured by real estate of a hotel property
located in Bowling Green, Kentucky 935,000
-----------
Total 5,897,269
Less current portion 221,250
-----------
Noncurrent portion of mortgage notes payable $ 5,676,019
===========
</TABLE>
9
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
The combined aggregate amount of maturities for all mortgage notes
payable for each of the next five years and thereafter is as follows:
Year Ending
December 31,
1997 $ 221,000
1998 249,000
1999 273,000
2000 946,000
2001 819,000
Thereafter 3,389,000
---------
$5,897,000
=========
(4) Note Payable
Note payable represented a $180,000 note payable to a bank dated
February 12, 1996, which bore interest at prime plus 1% (9.25% at
December 31, 1996) due quarterly. The note was secured by a second
mortgage on a hotel property located in Caruthersville, Missouri, and
was guaranteed by the Company's shareholder. The note was fully paid
and satisfied in January 1997 by Hatfield Inns, LLC, the successor to
the Predecessor (note 7).
(5) Income Taxes
The provision for income tax expense, principally Federal, consists of
the following:
Current expense $ --
Deferred expense 1,601
------
$ 1,601
======
Total income tax expense recognized differs from the amount computed by
applying the U.S. Federal income tax rate of 34% to pretax income as a
result of the following:
Computed "expected" tax expense $ 1,982
State income taxes, net of Federal income tax benefit 308
Other, net (689)
-------
$ 1,601
=======
The tax effects of temporary differences that give rise to the deferred
tax asset and liability are presented below:
Deferred tax asset - net operating loss carryforward $ 134,952
Deferred tax liability - property and equipment (183,526)
---------
Net deferred tax liability $ (48,574)
=========
10
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
At December 31, 1996, the Predecessor had a net operating loss
carryforward for Federal income tax purposes of approximately $337,000
which is available to offset future taxable income, if any, through
2011.
(6) Transactions with Affiliates
(a) Advances from Shareholder
Advances from shareholder of $485,025 consist of the
following:
(i) $115,000 advance relating to a shareholder bank note
payable of the same amount bearing interest at 9.75% through
April 2, 1997, at which time the note maturity date was
extended to October 2, 1997 and the interest rate increased to
10%. This shareholder note payable is secured by the
shareholder's stock in another company.
(ii) $370,025 advance relating to a shareholder $400,025 line
of credit with a bank bearing interest at prime plus 1%. The
shareholder's line of credit matures on May 2, 1997 and is
secured by the shareholder's stock in another company.
These advances from shareholder have terms consistent with the
terms of the related underlying shareholder's debt.
(b) Advances from Affiliate
Predecessor has received advances from All American Group,
Inc. (a corporation wholly-owned by the shareholder of the
Predecessor). There are no payment terms, interest, or due
dates on these advances.
(c) Management Fees
Fees are paid to All American Group, Inc. based on 5% of gross
revenues for management and accounting services rendered. The
total expense for these services was $123,634 for the year
ended December 31, 1996.
(d) Contribution from Shareholder
During 1996, the Predecessor's shareholder forgave advances
totaling $356,636, which were then recorded by the Predecessor
as additional paid-in capital.
11
<PAGE>
HATFIELD INN, INC.
NOTES TO FINANCIAL STATEMENTS
(7) Subsequent Events
On January 1, 1997, Hatfield Inn, Inc. (Predecessor) was merged into
Hatfield Inns, LLC (a corporation wholly-owned by the shareholder of
the Predecessor). The merger of these entities qualified as a tax-free
reorganization and was accounted for as a transaction between entities
under common control. The companies merged using historical costs in a
manner similar to a pooling of interests.
On March 11, 1997, Hatfield Inns, LLC entered into an agreement to
merge with and into Buckhead America Corporation ("Buckhead"). In the
planned merger, Buckhead would assume the outstanding debt of Hatfield
Inns, LLC and issue approximately $3,000,000 of Buckhead redeemable
preferred stock to the members in Hatfield Inns, LLC. The merger is
subject to the approval of the issuance of preferred stock by the
shareholders of Buckhead at their annual meeting, which is scheduled
to occur on June 26, 1997.
12
<PAGE>
HATFIELD INNS, LLC
Condensed Balance Sheet
June 30, 1997
(Unaudited)
Assets
Current assets:
Cash $ 111,405
Accounts receivable 116,565
Inventories 43,566
Prepaid expenses 16,326
----------
Total current assets 287,862
Hotel property and equipment 8,173,275
Less accumulated depreciation 1,041,470
----------
Net hotel property and equipment 7,131,805
Construction in progress 650,000
Due from affiliate 79,985
Deferred loan costs, net of accumulated
amortization of $10,641 59,033
Other Assets 14,499
----------
$ 8,223,184
==========
Liabilities and Members' Equity
Current liabilities:
Accounts payable and accrued expenses $ 231,837
Advances from members 557,717
Current portion of notes payable 301,620
----------
Total current liabilities 1,091,174
Deferred income taxes 41,346
Noncurrent portion of notes payable 6,315,303
----------
Total liabilities 7,447,823
----------
Members' equity 775,361
----------
$ 8,223,184
==========
See accompanying notes to condensed financial statements.
13
<PAGE>
HATFIELD INNS, LLC
Condensed Statement of Loss
Six months ended June 30, 1997
(Unaudited)
HATFIELD INN, INC.
Condensed Statement of Loss
Six Months ended June 30, 1996
(Unaudited)
1997 1996
---- ----
Revenues:
Room $ 1,323,233 1,109,861
Other 61,708 55,536
--------- ---------
Total revenues 1,384,941 1,165,397
--------- ---------
Operating expenses 885,005 776,520
Depreciation and amortization 231,359 196,771
--------- ---------
1,116,364 973,291
--------- ---------
Income from operations 268,577 192,106
Interest expense 319,666 244,724
--------- ---------
Loss before income taxes (51,089) (52,618)
Deferred income tax benefit 7,228 --
--------- ---------
Net loss $ (43,861) (52,618)
========= =========
See accompanying notes to condensed financial statements.
496453.1
14
<PAGE>
HATFIELD INNS, LLC
Condensed Statement of Cash Flows
Six months ended June 30, 1997
(Unaudited)
HATFIELD INN, INC.
Condensed Statement of Cash Flows
Six Months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (43,861) (52,618)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Depreciation and amortization 231,359 196,771
Deferred income tax expense (benefit) (7,228) 0
Other Net (221,491) (17,530)
--------- ---------
Net cash provided (used) in operating activities (41,221) 126,623
--------- ---------
Cash flows used in investing activities - additions to hotel property
and equipment (714,855) (396,515)
--------- ---------
Cash flows provided by financing activities 827,161 272,000
--------- ---------
Net increase in cash 71,085 2,108
Cash at beginning of period 40,320 104,224
--------- ---------
Cash at end of period $ 111,405 106,332
========= =========
</TABLE>
See accompanying notes to condensed financial statements.
496453.1
15
<PAGE>
HATFIELD INNS, LLC
Notes to Condensed Financial Statements
June 30, 1997
(Unaudited)
HATFIELD INN, INC.
Notes to Condensed Financial Statements
June 30, 1996
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited 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 Hatfield Inns, LLC management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for interim
periods are not necessarily indicative of the results that may be
expected for a full year or any other interim period. For further
information, see the financial statements of Hatfield Inn, Inc. (the
"Predecessor") included herein for the year ended December 31, 1996.
(2) Formation and Merger
Hatfield Inns, LLC was formed on January 1, 1997. The Predecessor (a
corporation wholly-owned by the members of Hatfield Inns, LLC) was
merged with and into Hatfield Inns, LLC on January 1, 1997. The merger
qualified as a tax-free organization and was accounted for as a
transaction between entities under common control. The companies
merged using historical costs in a manner similar to a pooling of
interests.
On September 23, 1997, Hatfield Inns, LLC was merged with and into
BLM-RH, Inc. a wholly-owned subsidiary of Buckhead America Corporation
for the aggregate consideration of approximately $10.12 million,
consisting of $3 million of Buckhead preferred stock and the
assumption of approximately $7.12 million of debt.
496453.1
16
<PAGE>
(b) Unaudited Pro Forma Condensed Consolidated Financial Information.
Set forth below are the following unaudited pro forma condensed
consolidated financial statements:
1. Introduction to Condensed Consolidated Pro Forma Financial
Statements.
2. Pro Forma Condensed Consolidated Statement of Income for the Year
Ended December 31, 1996.
3. Pro Forma Condensed Consolidated Statement of Income for the Six
Months Ended June 30, 1997.
4. Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1997.
496453.1
17
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION AND HISTORICAL FINANCIAL
INFORMATION OF HATFIELD INN, INC. AND HATFIELD INNS, LLC
On January 1, 1997, Hatfield Inn, Inc. ("Predecessor") was merged into
Hatfield. The merger of these entities qualified as a tax-free reorganization
and was accounted for as a transaction between entities under common control.
The companies merged using historical costs in a manner similar to a pooling of
interests. The financial statements included herein reflect the operations of
the Predecessor through December 31, 1996 and Hatfield beginning January 1,
1997.
The following unaudited pro forma condensed consolidated income
statements of the Company for the six months ended June 30, 1997 and the year
ended December 31, 1996 and the pro forma condensed consolidated balance sheet
as of June 30, 1997 (collectively referred to hereinafter as the "Pro Forma
Statements") give effect to the acquisition of Hatfield effective September 1,
1997 and to the prior acquisition on May 8, 1997 of The Lodge Keeper Group, Inc.
("Lodgekeeper"). The Pro Forma Statements reflect the pro forma results of the
Company, Hatfield, and Lodgekeeper, together with the applicable adjustments, as
if Hatfield and Lodgekeeper had been acquired as of January 1, 1996 for income
statement purposes and as if Hatfield had been acquired as of June 30, 1997 for
balance sheet purposes. The Pro Forma Statements are not necessarily indicative
of the results of operations of the Company, as they may be in the future or as
they might have been had the acquisitions been consummated on the dates
indicated.
The pro forma adjustments are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable in the circumstances. The Pro Forma Statements and accompanying notes
should be read in conjunction with the historical financial statements of the
Company included in its Form 10-KSB for the year ended December 31, 1996 and its
Form 10-QSB for the three months ended June 30, 1997. In addition, the Pro Forma
Statements and accompanying notes should be read in conjunction with the
historical financial statements of the Predecessor included herein for the year
ended December 31, 1996 and the historical financial statements of Hatfield
included herein for the six months ended June 30, 1997 and the historical
financial statements of Lodgekeeper included in the Company's Form 8-K/A filed
on July 22, 1997.
496453.1 18
<PAGE>
BUCKHEAD AMERICA CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Income Statement
Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Buckhead The Lodge Hatfield
America Keeper Pro Forma Pro Forma Inns, Pro Forma Pro Forma
Corporation Group, Inc. Adjustments Consolidated Inc. Adjustments Consolidated
----------- ---------- ----------- ------------ -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Hotel revenues 9,979,477 10,528,752 (536,277) 19,971,952 2,477,308 22,449,260
Interest income 1,042,869 57,518 39,347 1,139,734 1,139,734
Other income 2,850,459 525,931 37,327 3,413,717 3,413,717
---------- --------- ---------- ---------- --------- ---------
Total revenues 13,872,805 11,112,201 (459,603) 24,525,403 2,477,308 27,002,711
---------- ---------- ---------- ---------- --------- ----------
Expenses:
Hotel operations 8,659,355 7,938,205 (538,980) 16,058,580 1,589,137 (80,000)(a) 17,567,717
Depreciation and amortization 956,900 666,054 (313,636) 1,309,318 386,814 (54,521)(b) 1,641,611
Other operating and administrative 934,543 1,876,800 82,199 2,893,542 2,893,542
Interest 1,505,163 545,123 18,305 2,068,591 495,529 (12,666)(c) 2,551,454
--------- ---------- --------- ---------- --------- -------- ---------
Total operating, administrative
and interest expenses 12,055,961 11,026,182 (752,112) 22,330,031 2,471,480 (147,187) 24,654,324
---------- ---------- --------- ----------- --------- --------- ----------
Income before income taxes 1,816,844 86,019 292,509 2,195,372 5,828 147,187 2,348,387
Provision for income taxes 1,601 (1,601)(d)
--------- ---------
Net income $1,816,844 86,019 292,509 2,195,372 4,227 148,788 2,348,387
========= ========== ======= ========== ========= ========= =========
Dividends paid on redeemable preferred
stock (187,337)(e) (187,337)
---------
Net income applicable to common
shareholders 2,161,050
=========
Net income per common and common
equivalent share:
Primary $ 1.00 1.15 1.13
==== ==== ----
Fully diluted $ 1.00 1.15 1.05
==== ==== ----
Weighted average number
of common and common equivalent
shares used to calculate
net income per share:
Primary 1,814,510 101,320 1,915,830 (g) 1,915,830
========= ======= ========= =========
Fully diluted 1,815,049 101,320 1,916,369 (h) 2,233,647
========= ======= ========= =========
</TABLE>
See notes to the pro forma condensed consolidated financial statements.
496453.1
19
<PAGE>
<TABLE>
<CAPTION>
BUCKHEAD AMERICA CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Income Statement
Six Months Ended June 30, 1997
(Unaudited)
Buckhead The Hatfield
America Lodge Keeper Pro Forma Pro Forma Inns, Pro Forma Pro Forma
Corporation Group, Inc. Adjustments Consolidated LLC Adjustments Consolidated
----------- ----------- ----------- ------------ --- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Hotel revenues 5,714,906 2,442,966 8,157,872 1,384,941 9,542,813
Interest income 676,804 25,551 8,542 710,897 710,897
Other income 1,549,355 1,293,702 2,843,057 2,843,057
Total revenues 7,941,065 3,762,219 11,711,826 1,384,941 13,096,767
--------- --------- -------- ---------- --------- ----------
Expenses:
Hotel operations 4,287,805 2,420,289 6,708,094 885,005 (40,000)(a) 7,553,099
Depreciation and amortization 458,544 176,407 (78,230) 556,721 231,359 (57,489)(b) 730,591
Other operating and administrative 1,447,185 778,316 2,225,501 2,225,501
Interest 613,542 168,011 781,553 319,666 (6,273)(c) 1,094,946
--------- ------- -------- ---------- --------- ----------
Total operating,
administrative and
interest expenses 6,807,076 3,543,023 10,271,869 1,436,030 11,604,137
--------- --------- -------- ---------- --------- ---------- ----------
Income before income taxes 1,133,989 219,196 86,772 1,439,957 (51,089) (103,762) 1,492,630
--------- ------- -------- ---------- --------- ---------- ----------
Provision for income taxes 7,228 7,228)(d)
Net income(loss) 1,133,989 219,196 86,772 1,439,957 (43,861) 96,534 1,492,630
========= ======= ======== ========== ========= ========== ==========
Dividends paid on redeemable preferred
stock 125,528(f) 125,528
---------
Net income applicable to common 1,367,102
shareholders =========
Net income per common and common
equivalent share:
Primary .61 .75 .71
========= ========= =========
Fully diluted .61 .75 .64
========= ========= =========
Weighted average number of common and
common equivalent shares used to calculate
net income per share:
Primary 1,854,790 71,652 1,926,442 (g) 1,926,442
========= ======== ========== ==========
Fully diluted 1,862,418 71,652 1,934,070 (h) 2,347,357
========= ======== ========== ==========
</TABLE>
See notes to the pro forma condensed consolidated financial statements.
20
<PAGE>
<TABLE>
<CAPTION>
BUCKHEAD AMERICA CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
HISTORICAL HISTORICAL BUCKHEAD PRO FORMA PRO FORMA
HATFIELD INNS, AMERICA PURCHASE ACCOUNTING CONSOLIDATED
ASSETS LLC CORPORATION ADJUSTMENTS BALANCE SHEET
- ------------------------------------------- ---------------- ------------------ ------------------- ---------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 111,405 1,764,961 1,876,366
Short-term investments 116,565 1,504,806 1,621,371
Current portions of notes receivable 43,566 598,681 642,247
Other current assets 16,326 1,333,712 1,350,038
---------------- ------------------ ------------------- ---------------
Total current assets 287,862 5,202,160 5,490,022
Noncurrent portions of notes receivable 653,754 653,754
Property and equipment, at cost, net of
accumulated depreciation 7,131,805 23,700,624 2,164,678 (i) 32,997,107
Construction in progress 650,000 650,000
Other assets 153,517 5,218,569 5,372,086
---------------- ------------------ ------------------- ---------------
8,223,184 34,775,107 2,164,678 45,162,969
================ ================== =================== ===============
LIABILITIES AND SHAREHOLDERS' / MEMBERS' EQUITY
- -----------------------------------------------
Current liabilities:
Accounts payable and accrued expenses 231,837 2,553,183 450,000 (j) 3,235,020
Advances from members 557,717 557,717
Current portions of notes payable 301,620 1,016,951 1,318,571
---------------- ------------------ ------------------- ---------------
Total current liabilities 1,091,174 3,570,134 450,000 5,111,308
Deferred tax liability 41,346 (41,346) (k)
Noncurrent portions of notes payable 6,315,303 15,992,325 22,307,628
Other liabilities 140,735 140,735
---------------- ------------------ ------------------- ---------------
Total liabilities 7,447,823 19,703,194 408,654 27,559,671
---------------- ------------------ ------------------- ---------------
Minority interest in partnership 650,338 650,338
Redeemable preferred stock 2,531,385 (l) 2,531,385
Common Shareholders'/members' equity 775,361 14,421,575 (775,361) (m) 14,421,575
---------------- ------------------ ------------------- ---------------
$ 8,223,184 34,775,107 2,164,678 45,162,969
================ ================== =================== ===============
</TABLE>
See notes to the pro forma condensed consolidated financial statements.
496453.1
21
<PAGE>
Buckhead America Corporation and Subsidiaries
Notes to the Pro Forma Condensed Consolidated
Financial Statements
(Unaudited)
The acquisition of Lodgekeeper has been accounted for as a purchase with a
total purchase price of approximately $7.3 million. The purchase price includes
the assumption of approximately $4.8 million of debt, cash payments to sellers
and closing costs of approximately $1.0 million, issuance of approximately $.7
million of common stock, and the assumption of a working capital deficit of
approximately $.8 million.
Certain assets and liabilities of The Lodge Keeper Group, Inc. were not
included in the acquisition. These excluded items primarily relate to a
condominium project and a chain of coffee shops. The pro forma financial
statements include adjustments to account for the exclusion of these items.
The pro forma adjustments also reflect the effect of the purchase
accounting adjustments. The purchase price has been allocated to the acquired
assets and liabilities based on their respective estimated fair values. The
expected changes to related income statement amounts (such as depreciation and
amortization) are presented as if the acquisition had occurred at the beginning
of the periods presented.
The weighted average number of shares used to calculate net income per
share increased by 106,320 shares, which is the number of shares issued in the
acquisition and decreased by 5,000 shares which were shares previously held by
The Lodge Keeper Group, Inc. and now held as treasury shares.
The acquisition of Hatfield will be accounted for as a purchase with a
total purchase price of $10,250,000 plus estimated closing costs of
approximately $450,000. The purchase price includes the assumption of debt of
approximately $7,250,000 and net working capital (as defined) at closing and the
issuance of redeemable preferred stock of the Company ("Preferred Stock") for
the remainder.
As of June 30, 1997, a hotel that will be acquired from Hatfield was under
construction. The Merger Agreement allocates $1,250,000 of the total purchase
price to this hotel under construction. Approximately $600,000 of the Preferred
Stock will be held back until the completion of the hotel. The remaining
consideration for the hotel will consist of the assumption of approximately
$650,000 in debt.
The Predecessor historical financial statements include the results of a
hotel that was completed and opened for operations in late November of 1996. For
the Pro Forma Statements, the portion of Preferred Stock consideration allocated
to this hotel was not considered to be outstanding until the opening of the
hotel. Consequently, the earnings per share calculations for the year ended
December 31, 1996 only assume the issuance of Preferred Stock for this hotel as
of December 1, 1996.
(a) To eliminate the management fees with the exception of the estimated
incremental costs to the Company associated with managing the hotel
properties. The management fees were paid to an affiliated company and
such fees would not have been incurred by the Company.
496453.1
22
<PAGE>
(b) To adjust depreciation and amortization expense of the acquired assets
for the new cost basis and to conform with the Company's depreciation
policies. No depreciation was recorded on the costs allocated to
construction in progress since the hotel is not yet completed.
(c) To adjust interest expense on one mortgage note for the new rate
expected to be obtained upon refinancing by the Company.
(d) To adjust the provision for income taxes after giving affect to the
Company's tax position.
(e) To record cash dividends on redeemable preferred stock. Dividends paid
on redeemable preferred stock were calculated based on the total
preferred stock outstanding, less preferred stock held back until
completion of the hotel currently under construction, less the portion
of preferred stock for eleven months in 1996 allocated to a hotel
property that was not completed until the end of November 1996.
(f) To record cash dividends on redeemable preferred stock. Dividends paid
on redeemable preferred stock were calculated based on the total
preferred stock outstanding.
(g) There was no change in the weighted average number of common shares
outstanding as the redeemable preferred stock is not a common stock
equivalent.
(h) The fully diluted number of common shares and common share equivalents
outstanding is computed after giving effect to the redeemable preferred
stock using the "if-converted" method and the assumptions in (e) above
for the year ended December 31, 1996, and (f) above for the six months
ended June 30, 1997.
(i) Represents the purchase accounting adjustment to revalue property and
equipment.
(j) To record estimated closing costs for the acquisition of Hatfield.
(k) To remove the deferred tax liability from the balance sheet due to the
available offsetting tax carryforwards of the Company.
(l) To record the redeemable preferred stock issued to the former owners of
Hatfield.
(m) To eliminate Hatfield members' equity.
496453.1
23
<PAGE>
(c) Exhibits.
Exhibit
Number Description
- ------ -----------
2.1* Agreement of Merger, as amended, dated as of March 11, 1997 among
the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy Hatfield,
Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
2.1.1+ Second Amendment to Agreement of Merger, dated as of September
17, 1997 among the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy
Hatfield, Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
23.1 Consent of KPMG Peat Marwick LLP
- -------------------------
* Incorporated herein by reference to Appendix B of the Registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on June 9,
1997.
+ Previously filed.
496453.1
24
<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 hereunto duly authorized.
BUCKHEAD AMERICA CORPORATION
Date: December 12, 1997 By:/s/ Robert B. Lee
-----------------
Robert B. Lee, Vice President and Chief
Financial Officer
496453.1
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1* Agreement of Merger, as amended, dated as of March 11, 1997 among
the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy Hatfield,
Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
2.1.1+ Second Amendment to Agreement of Merger, dated as of September
17, 1997 among the Company, BLM-RH, Inc., Hatfield Inns, LLC, Guy
Hatfield, Dorothy Hatfield, and Hatfield Inn Advisors, LLC.
23.1 Consent of KPMG Peat Marwick LLP.
- -----------------------
* Incorporated herein by reference to Appendix B of the Registrant's Definitive
Proxy Statement filed with the Securities and Exchange Commission on June 9,
1997.
+ Previously filed.
496453.1
ACCOUNTANTS' CONSENT
The Board of Directors
Buckhead America Corporation:
We consent to the incorporation by reference in the Registration
Statements (No. 33-97046 and 333-33097) on Form S-8 and Registration Statements
(No. 333-05313 and 333-37691) on Form S-3 of Buckhead America Corporation of our
report dated April 11, 1997, with respect to the financial statements of
Hatfield Inn, Inc., included in Buckhead America Corporation Form 8-K/A
(Amendment No. 2) dated September 23, 1997, and filed with the Securities and
Exchange Commission on December 12, 1997.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
December 12, 1997
496453.1
