U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
[ ] 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 0-22132
BUCKHEAD AMERICA CORPORATION
(Exact name of small business issuer as
specified in its charter)
DELAWARE 58-2023732
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4243 DUNWOODY CLUB DRIVE, SUITE 200, ATLANTA, GEORGIA 30350
(Address of principal executive offices)
(770) 393-2662
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: April 30, 1998
Common stock, par value $.01 - 1,897,780 shares outstanding
Transitional Small Business Disclosure Format (Check one):
Yes No X
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
March 31, 1998 and 1997
(Unaudited)
2
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 1998
(Unaudited)
Assets
Current assets:
Cash and cash equivalents, including
restricted cash of $518,339 $ 1,642,531
Investment securities 3,226,344
Accounts receivable 1,384,281
Current portions of notes receivable 267,992
Other current assets 326,617
----------
Total current assets 6,847,765
Noncurrent portions of notes receivable 821,581
Property and equipment, at cost, net of
accumulated depreciation 34,322,961
Deferred tax assets 3,150,000
Deferred costs, net 2,100,269
Leasehold interests, net 2,800,294
Other assets 1,286,349
----------
$ 51,329,219
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 2,998,062
Current portions of notes payable 842,099
----------
Total current liabilities 3,840,161
Noncurrent portions of notes payable 27,537,837
Other liabilities 304,034
Total liabilities 31,682,032
Minority interest in partnership 757,822
Shareholders' equity:
Series A preferred stock; par value $100;
200,000 shares authorized; 30,000 shares
issued and outstanding 3,000,000
Common stock; $.01 par value; 3,000,000
shares authorized; 1,949,630 shares issued
and 1,897,780 shares outstanding 19,496
Additional paid-in capital 6,963,024
Retained earnings 9,329,166
Treasury stock (51,850 shares) (422,321)
----------
Total shareholders' equity 18,889,365
$ 51,329,219
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income(Loss)
Three Months ended March 31, 1998 and 1997
(Unaudited)
1998 1997
----------- -----------
Revenues:
Hotel revenues $ 5,032,590 2,288,172
Interest income 90,903 562,579
Other income 188,216 886,121
---------- ----------
Total revenues 5,311,709 3,736,872
---------- ----------
Expenses:
Hotel operations 3,934,357 1,563,704
Other operating and administrative 914,858 611,578
Depreciation and amortization 411,631 190,300
Interest 660,049 257,048
---------- ----------
Total expenses 5,920,895 2,622,630
---------- ----------
Income(loss) before income taxes (609,186) 1,114,242
Deferred income tax benefit (220,000) -
--------- ----------
Net income(loss) $ (389,186) 1,114,242
========== ==========
Net income(loss) per common share:
Basic $ (0.24) 0.63
===== ====
Diluted $ (0.24) 0.61
===== ====
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(Unaudited)
1998 1997
---------- ----------
Cash flows from operating activities:
Net income(loss) $ (389,186) 1,114,242
Adjustments to reconcile net income(loss)
to net cash provided(used)
by operating activities:
Depreciation and amortization 411,631 190,300
Gain on note sale - (800,000)
Other, net (486,128) (214,387)
---------- ---------
Net cash provided(used) by
operating activities (463,683) 290,155
-------- ----------
Cash flows from investing activities:
Note receivable principal receipts 192,034 852,660
Originations of notes receivable (186,780) (250,000)
Capital expenditures (389,685) (513,855)
Other, net (513,957) (233,532)
---------- ----------
Net cash used by
investing activities (898,388) (144,727)
---------- ----------
Cash flows from financing activities:
Repayments of notes payable (228,654) (68,697)
Additional borrowings 26,482 -
Preferred stock dividends (75,000) -
---------- ---------
Net cash used by
financing activities (277,172) (68,697)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (1,639,243) 76,731
Cash and cash equivalents at beginning
of period 3,281,774 1,801,670
---------- ----------
Cash and cash equivalents at end of period $ 1,642,531 1,878,401
========== ==========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 1998 and 1997
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated 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.
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 consolidated financial
statements included in the Company's Form 10-KSB for the year ended
December 31, 1997.
(2) Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("SFAS 130"). This statement establishes standards for reporting and
display of comprehensive income and its components in a full set of general
purpose financial statements. The term "comprehensive income" is used in
SFAS 130 to describe the total of all components of comprehensive income
including net income. "Other comprehensive income" refers to revenues,
expenses, gains, and losses that are included in comprehensive income but
excluded from earnings under current accounting standards. Currently,
"other comprehensive income" for the Company consists solely of items
previously recorded as a component of shareholders' equity under SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities.
Total comprehensive income(loss)for the three months ended March 31, 1998
was $(389,186) compared to $659,114 for the three months ended March 31,
1997.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION.
First Quarter 1997
The Company completed the renovations of the Atlanta, Georgia Country Hearth Inn
in January 1997. The Company completed the renovations of the Dalton, Georgia
Country Hearth Inn in February 1997 and also completed certain enhancements to
the Orlando, Florida Country Hearth Inn which were required under its debt
obligation. Capital expenditures on these three hotels during the first quarter
of 1997 aggregated approximately $500,000 and were funded from available cash
and restricted funds.
The Company received $800,000 cash from the sale of a mortgage note in February
1997. The Company also received approximately $1.6 million cash from its
investment in Industrial Revenue Bonds which were called in February 1997.
In March 1997, the Company announced that it had entered into two separate
agreements for the acquisition of hotels, hotel management contracts, and a
hotel management business. One agreement provided for the purchase of eight
Hatfield Inns located in Kentucky and Missouri. The Hatfield acquisition was
completed in September 1997. The second agreement was for the acquisition of The
Lodge Keeper Group Inc. ("Lodge Keeper"), a closely held concern that managed 24
hotels in Ohio, Indiana, and Michigan. The transaction was completed in May
1997.
In February 1997, the Company sold two wholly owned subsidiaries which
held the investment in Days Inns Mortgage Trust ("DIMT"). DIMT was treated as a
partnership for income tax purposes and had produced significant tax purpose net
operating losses ("NOLs") totaling approximately $34 million through December
31, 1996. These NOLs had no impact on the Company's book provision for regular
taxes because the ultimate dissolution of the partnership would result in
immediate gain recognition for a comparable amount. Because of NOL limitations,
the Company was exposed, however, to significant potential future alternative
minimum tax liability. All of these tax attributes accompanied the DIMT interest
with its sale, and the Company's tax position is no longer impacted by DIMT.
First Quarter 1998
The conversion of the Hatfield Inns to Country Hearth Inns was completed in 1997
and the Company began 1998 with 16 hotel properties owned, 36 properties
managed, and 29 Country Hearth Inn franchise properties open and operating. The
30th Country Hearth Inn was opened in March 1998.
Construction of an additional Company owned Country Hearth Inn in Nicholasville,
Kentucky is underway and the Company acquired rights to a site in Eddyville,
Kentucky which will begin construction in the second quarter. Loan commitments
are in place to fund the major portion of the construction costs for both of
these projects.
7
<PAGE>
Renovation and conversion of two Lodge Keeper Ohio properties to Country Hearth
Inns was begun in the first quarter using funds from the Company's December 1997
debenture sale.
Additionally, four new franchised properties are under construction in Kentucky,
Missouri, and Georgia and two conversion franchise properties in Georgia are
under renovation.
All ten of the above described properties are expected to open as Country Hearth
Inns in 1998. The Company has also announced agreements for the acquisition
and/or development of twelve additional Country Hearth Inn properties.
Management believes the Company has adequate resources for the completion of its
present acquisition and development commitments. Management presently intends to
pursue additional multi-property acquisitions. Such acquisitions, if any, would
more likely than not require additional debt and/or equity financing.
RESULTS OF OPERATIONS
First Quarter of 1998 vs. First Quarter of 1997
Hotel revenues in the first quarter of 1998 increased to over $5 million, a 120%
increase from the same period in 1997. Hotel operating profits approached $1.1
million in the first quarter of 1998, a 52% increase from the 1997 period. These
increases result from the Hatfield and Lodge Keeper acquisitions.
Hotel operating profit margins in the first quarter of 1998 declined to 22%
versus 32% in 1997. This is attributable to the extreme seasonal impact given
the geographic locations of the acquired hotels. Management expects profit
margins to increase sharply in the second and third quarters before declining
again in the fourth. In the aggregate, operating profits for hotels which were
owned in both of the first quarters of 1997 and 1998 increased. First quarter
1998 results of the acquired hotels were in line with management's expectations.
Note receivable interest income continued to decline as a result of decreases in
the note receivable portfolio. The first quarter of 1997 included investment
income of approximately $450,000 as a result of the Industrial Revenue Bonds
which were called.
Other income in 1997 included the $800,000 note sale gain previously discussed.
Other income also included Country Hearth Inn franchise fees of approximately
$108,000 in each of the first quarters of 1998 and 1997. Management expects
franchise fee income to increase as more franchised properties are opened.
The approximate $300,000 increase in other operating and administrative expenses
resulted primarily from the Lodge Keeper acquisition and the total of such
expenses are in line with management's expectations. Lodge Keeper has the
capacity to absorb additional properties without a proportionate incremental
increase in overhead.
8
<PAGE>
Property related depreciation and interest expense in the first quarter of 1998
increased proportionately to the revenue increases associated with the Hatfield
and Lodge Keeper acquisitions. The Company also recognized $100,000 of interest
expense on its convertible debentures issued in December 1997.
As previously stated, management believes the Company has adequate resources for
the completion of its present acquisition and development commitments.
Management also believes the Company has adequate liquidity for purposes of
funding seasonal cash flow shortfalls and does not anticipate the need for
additional financing for operating purposes.
RISK FACTORS
This Form 10-QSB contains forward looking statements that involve risks
and uncertainties. Statements contained in this Form 10-QSB that are not
historical facts are forward looking statements that are subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. The
Company's actual results may differ significantly and materially from the
results indicated by such forward looking statements and by past results. For a
discussion of risk factors, see the "RISK FACTOR" section contained in the
Company's Registration Statement on Form S-3 (File No. 333-37691).
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBIT INDEX
Exhibit Description
3(i) Articles of Incorporation.(Incorporated by reference
to Exhibit 3(i) to the Registrant's Registration
Statement on Form 10-SB (No.0-22132) which became
effective on
November 22, 1993.)
3(i)(a) Certificate of Amendment of Certificate of
Incorporation. (Incorporated by reference to Exhibit
3(i)(a) to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994.)
3(i)(b) Certificate of Amendment of Certificate of
Incorporation. (Incorporated by reference to Appendix
"A" to the Registrant's Definitive Proxy Statement
filed with the Securities and Exchange Commission on
June 9, 1997.)
3(ii) By-Laws - Amended and Restated as of June 27, 1994.
(Incorporated by reference to Exhibit 3(ii) to the
Registrant's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1994.)
4(i) Certificate of Designation, Preferences and Rights of
Series A Preferred Stock of the Registrant.
(Incorporated by reference to Exhibit 3(i)(c) to the
Registrant's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1997.)
11 Statement re: Computation of per share Earnings
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on January 9, 1998
which reported the December 22, 1997 sale of debentures to
investment funds managed by Tower Investment Group, Inc.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Buckhead America Corporation
(Registrant)
Date: May 15, 1998 /s/ Douglas C. Collins
Douglas C. Collins
President and Chief Executive Officer
Date: May 15, 1998 /s/ Robert B. Lee
Robert B. Lee
Senior Vice President and
Chief Financial and Accounting Officer
11
EXHIBIT 11
Statement re: Computation of Per Share Earnings
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
------------------ -------------------
Basic Net Income(Loss) per Common Share:
Numerator:
Net income(loss) for the period $ (389,186) 1,114,242
Series A Preferred Stock Dividends (75,000) -
------ --------
Net income(loss) attributable to
common shares $ (464,186) 1,114,242
=========== =========
Denominator:
Actual common shares outstanding:
Beginning of period 1,897,780 1,771,127
End of period 1,897,780 1,771,127
Weighted average for the period
(Based on the actual time which
the incremental shares, if any,
were outstanding) 1,897,780 1,771,127
========= =========
Basic net income(loss) per common share $ (0.24) 0.63
===== =====
Diluted Net Income(Loss) per Common Share:
Numerator:
Net income(loss) attributable to common
shares $ (464,186) 1,114,242
=========== =========
Denominator:
Weighted average common shares outstanding 1,897,780 1,771,127
Effect of common share equivalents resulting
from "in-the-money" stock options outstanding
during the period - * 50,867
----------- ---------
Weighted average number of common and
common equivalent shares used to calculate
diluted net income(loss) per common share 1,897,780 1,821,994
========= =========
Diluted net income(loss) per common share $ (0.24) 0.61
===== =====
* Note: The assumed conversion of the convertible debentures and the Series A
preferred stock and the effect of "in-the-money" stock options were
excluded from the 1998 computation of diluted net income(loss) per share
because the effects are antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BUCKHEAD AMERICA CORPORATION FOR THE QUARTERLY PERIODS
ENDED MARCH 31, 1997, JUNE 30, 1997, SEPTEMBER 30, 1997 AND MARCH 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<RESTATED>
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<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 APR-01-1997 JUL-01-1997 JAN-01-1998
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 MAR-31-1998
<CASH> 1,878 1,765 1,821 1,643
<SECURITIES> 2,649 1,505 321 3,226
<RECEIVABLES> 1,281 1,403 1,321 1,147
<ALLOWANCES> 151 151 92 56
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<SALES> 2,288 5,715 10,797 5,033
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<CGS> 1,632 4,288 7,892 3,934
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<INTEREST-EXPENSE> 257 614 1,050 660
<INCOME-PRETAX> 1,114 1,134 1,236 (609)
<INCOME-TAX> 0 0 0 (220)
<INCOME-CONTINUING> 1,114 1,134 1,236 (389)
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