U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended SEPTEMBER 30, 2000
[ ] 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 registrant as specified in its charter)
DELAWARE 58-2023732
----------------------------------- -----------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7000 CENTRAL PARKWAY, SUITE 850, ATLANTA, GEORGIA 30328
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 393-2662
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 the latest practicable date: October 31, 2000
Common stock, par value $.01 - 2,028,244 shares outstanding
-----------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
September 30, 2000 and 1999
(Unaudited)
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(Unaudited)
<S> <C> <C>
September 30, December 31,
Assets 2000 1999
------------- ---------------
Current assets:
Cash and cash equivalents, including restricted cash of
$615,966 at September 30, 2000 and $486,160 at December 31, 1999 $ 2,087,416 2,390,856
Investment securities, including restricted securities of
$186,195 at September 30, 2000 and $215,849 at December 31, 1999 300,147 1,312,256
Accounts receivable, net 2,464,553 1,857,002
Current portions of notes receivable, net 577,381 517,870
Property held for sale, net 7,288,216 8,114,083
Other current assets 333,872 666,439
------------- ---------------
Total current assets 13,051,585 14,858,506
Noncurrent portions of notes receivable, net 3,864,300 3,482,633
Property and equipment, at cost, net 35,678,093 31,979,242
Deferred tax assets, net 2,994,328 2,788,000
Other assets 5,439,004 5,606,320
------------- ---------------
$ 61,027,310 58,714,701
============== ===============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 3,537,374 2,634,184
Current portions of notes payable 7,513,571 8,681,568
------------- ---------------
Total current liabilities 11,050,945 11,315,752
Noncurrent portions of notes payable 26,753,661 24,097,774
Other liabilities 322,314 396,266
------------- ---------------
Total liabilities 38,126,920 35,809,792
------------- ---------------
Minority interest in partnerships 933,718 450,290
Shareholders' equity:
Series A preferred stock; par value $100; 200,000 shares
authorized; 30,000 shares issued and outstanding 3,000,000 3,000,000
Common stock; $.01 par value; 5,000,000 shares authorized;
2,113,881 and 2,094,655 shares issued and 2,028,244 and 2,029,313
shares outstanding at September 30, 2000 and December 31, 1999,
respectively 21,139 20,947
Additional paid-in capital 7,950,859 7,854,921
Retained earnings 11,847,238 12,234,054
Accumulated other comprehensive loss (218,012) (148,023)
Treasury stock, 85,637 and 65,342 common shares
at September 30, 2000 and December 31, 1999, respectively (634,552) (507,280)
------------- ---------------
Total shareholders' equity 21,966,672 22,454,619
------------- ---------------
$ 61,027,310 58,714,701
============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Loss)
Nine Months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
--------------- ------------
Revenues:
Hotel revenues $ 18,872,173 19,446,646
Franchise fees, management fees, and other income 1,537,628 2,458,464
Gains on property and leasehold interest sales, net 591,584 3,152,213
Interest income 348,310 327,020
--------------- ------------
Total revenues 21,349,695 25,384,343
--------------- ------------
Hotel operations 13,496,944 3,577,320
Other operating and administrative 2,678,620 2,386,358
Leasehold rent 2,074,184 2,399,882
Depreciation and amortization 1,252,943 1,217,548
Interest 2,183,820 2,364,490
--------------- ------------
Total expenses 21,686,511 21,945,598
--------------- ------------
Income (loss) before income taxes (336,816) 3,438,745
Deferred income tax expense (benefit) (135,000) 1,385,000
--------------- ------------
Net income (loss) $ (201,816) 2,053,745
=============== ============
Net income (loss) per common share:
Basic $ (0.21) 0.93
=============== ============
Diluted $ (0.21) 0.72
=============== ============
Weighted average number of shares used to calculate
net income (loss) per common share:
Basic 2,021,892 1,967,715
=============== ============
Diluted 2,021,892 3,127,298
=============== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Loss)
Three Months ended September 30, 2000 and 1999
(Unaudited)
2000 1999
------------- -------------
Revenues:
Hotel revenues $ 6,567,003 6,901,554
Franchise fees, management fees, and other income 560,643 680,775
Gains on property and leasehold interest sales, net 578,411 212,729
Interest income 106,926 83,037
Total revenues 7,812,983 7,878,095
------------- -------------
Expenses:
Hotel operations 4,902,954 4,677,821
Other operating and administrative 934,278 759,053
Leasehold rent 740,987 898,912
Depreciation and amortization 437,021 345,290
Interest 765,232 732,379
------------- -------------
Total expenses 7,780,472 7,413,455
------------- -------------
Income before income taxes 32,511 464,640
Deferred income tax expense 13,000 185,000
------------- -------------
Net income $ 19,511 279,640
============= =============
Net income(loss) per common share:
Basic $ (0.03) 0.10
============= =============
Diluted $ (0.03) 0.10
============= =============
Weighted average number of shares used to
calculate net income(loss) per common share:
Basic 2,024,393 1,993,091
============= =============
Diluted 2,024,393 2,028,907
============= =============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
--------------- --------------
Cash from operating activities:
Net income (loss) $ (201,816) 2,053,745
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 1,252,943 1,217,548
Sales (purchases) of trading securities, net 1,034,142 (2,469,018)
Gains on property and leasehold interest sales (591,894) (5,471,395)
Minority interest in partnership income 190,196 2,521,962
Deferred income tax expense (benefit) (135,000) 1,385,000
Increase in accounts receivable, net (607,551) (244,220)
Increase (decrease) in accounts payable and accrued
expenses, net 903,190 (421,778)
Other, net 165,254 280,556
--------------- --------------
Net cash provided by (used in) operating activities 2,009,464 (1,147,600)
--------------- --------------
Cash flows from investing activities:
Principal receipts on notes receivable 535,628 183,725
Originations of notes receivable (652,500) (165,000)
Acquisitions of businesses and hotels (992,556) (506,040)
Capital expenditures (3,046,798) (2,488,400)
Proceeds from property and leasehold interest sales, net 1,185,266 8,379,512
Other, net (248,932) (166,934)
--------------- --------------
Net cash provided by (used in) investing activities (3,219,892) 5,236,863
--------------- --------------
Cash flows from financing activities:
Repayments of notes payable (990,911) (1,827,961)
Proceeds from notes payable 2,220,809 2,495,018
Distributions to minority interest partners (106,768) (3,206,894)
Preferred stock dividends paid (185,000) (94,375)
Other, net (31,142) 64,819
--------------- --------------
Net cash provided by (used in) financing activities 906,988 (2,569,393)
--------------- --------------
Net increase (decrease) in cash and cash equivalents (303,440) 1,519,870
Cash and cash equivalents at beginning of period 2,390,856 1,604,194
--------------- --------------
Cash and cash equivalents at end of period $ 2,087,416 3,124,064
================ =============
(Continued)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - Continued
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
Supplemental disclosures of noncash investing and financing activities:
During 2000, the Company recorded the following partial cash activity relating
to the purchases of three hotel properties, one of which it had previously
operated under a lease agreement:
Costs:
Cash $ 992,556
Lease deposit notes applied 225,694
Minority partner's investment 400,000
Notes payable assumed or issued 3,767,800
--------------
$ 5,386,050
==============
Allocated to:
Property and equipment $ 5,283,331
Other assets 102,719
--------------
$ 5,386,050
==============
During 2000, the Company recorded the following partial cash activity relating
to the sales of two hotel properties and the sales of leasehold interests in two
other hotel properties:
Proceeds:
Cash, net of closing costs $ 1,185,266
Notes receivable, net 550,000
---------------
1,735,266
Basis in assets sold:
Property and equipment, net 4,563,459
Other assets 89,721
Notes payable (3,509,808)
---------------
1,143,372
---------------
Net gains $ 591,894
===============
(Continued)
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows - Continued
Nine Months Ended September 30, 2000 and 1999
(Unaudited)
In June 1999, the Company recorded the following partial cash activity relating
to the sale of a 150-room hotel in Orlando, Florida:
Gross sales price $ 13,500,000
Portion allocated to management
and franchise contract termination (1,446,590)
-------------
Net sales price 12,053,410
Basis in property sold (6,474,116)
Costs (327,682)
-------------
Net gain $ 5,251,612
=============
The company owned approximately 59% of the partnership which owned the
hotel.
In August 1999, the Company recorded the following partial cash activity
relating to the acquisition of management contracts on nine hotel properties:
Cash and payables $ 506,040
Common stock issued (65,378 shares) 392,268
------------
Deferred costs of management contracts $ 898,308
============
During 1999, the Company recorded the following partial cash activity relating
to the sale of a hotel property and the sales of leasehold interests in four
other hotel properties:
Proceeds:
Cash, net of closing costs $ 709,437
Notes receivable, net 825,000
-------------
$ 1,534,437
Basis in assets sold:
Property and equipment, net 1,184,645
Other assets 655,009
Notes payable (525,000)
-------------
1,314,654
-------------
Net gains $ 219,783
=============
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2000 and 1999
(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, 1999.
(2) Comprehensive Income (Loss)
Total comprehensive income (loss) for the nine months ended September 30,
2000 and 1999 was $(271,805) and $2,065,410, respectively, and for the
three months ended September 30, 2000 and 1999 was $(3,819) and $283,529,
respectively.
(3) Segment Information
Condensed operating results for each Company segment for the nine months
ended September 30, 2000 and 1999 are presented below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Nine months ended September 30, 2000
----------------------------------------------------------------------------------
Hotel Hotel Hotel Development
Ownership Management Franchising & Corporate Eliminations Consolidated
--------- ---------- ----------- ----------- ------------ ------------
Revenues $18,872,173 1,533,545 1,378,818 955,893 (1,390,734) 21,349,695
Expenses 13,894,395 1,596,126 819,598 1,256,179 (1,390,734) 16,175,564
---------- ---------- ----------- ----------- ----------
EBITDAR* 4,977,778 (62,581) 559,220 (300,286) 5,174,131
Rent 2,074,184 - - - 2,074,184
Depreciation 1,040,418 100,025 94,500 18,000 1,252,943
Interest 1,729,339 - - 454,481 2,183,820
---------- ---------- ----------- ----------- ----------
Income (loss) before
income taxes $ 133,837 (162,606) 464,720 (772,767) (336,816)
========== ========== =========== =========== ==========
Nine months ended September 30, 1999
----------------------------------------------------------------------------------
Hotel Hotel Hotel Development
Ownership Management Franchising & Corporate Eliminations Consolidated
--------- ---------- ----------- ----------- ------------ ------------
Revenues $19,446,646 1,851,205 1,812,766 3,547,428 (1,273,702) 25,384,343
Expenses 13,893,547 1,287,712 835,222 1,220,899 (1,273,702) 15,963,678
---------- ---------- ----------- ----------- ----------
EBITDAR* 5,553,099 563,493 977,544 2,326,529 9,420,665
Rent 2,399,882 - - - 2,399,882
Depreciation 1,097,188 21,360 90,000 9,000 1,217,548
Interest 1,834,766 - - 529,724 2,364,490
---------- ---------- ----------- ----------- ----------
Income (loss) before
income taxes $ 221,263 542,133 887,544 1,787,805 3,438,745
========== ========== =========== =========== ==========
</TABLE>
(Continued)
9
<PAGE>
(Continued)
BUCKHEAD AMERICA CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 2000 and 1999
(Unaudited)
Condensed operating results for each Company segment for the three months ended
September 30, 2000 and 1999 are presented below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Three months ended September 30, 2000
----------------------------------------------------------------------------------
Hotel Hotel Hotel Development
Ownership Management Franchising & Corporate Eliminations Consolidated
--------- ---------- ----------- ----------- ------------ ------------
Revenues $ 6,567,003 585,773 474,611 686,586 (500,990) 7,812,983
Expenses 5,049,740 547,309 314,839 426,334 (500,990) 5,837,232
----------- ---------- ----------- ----------- ------------ ------------
EBITDAR* 1,517,263 38,464 159,772 260,252 1,975,751
Rent 740,987 - - - 740,987
Depreciation 362,740 36,781 31,500 6,000 437,021
Interest 626,369 - - 138,863 765,232
----------- ---------- ----------- ----------- ------------ ------------
Income (loss) before
income taxes $ (212,833) 1,683 128,272 115,389 32,511
=========== ========== =========== =========== ============ ============
Three months ended September 30, 1999
----------------------------------------------------------------------------------
Hotel Hotel Hotel Development
Ownership Management Franchising & Corporate Eliminations Consolidated
--------- ---------- ----------- ----------- ------------ ------------
Revenues $ 6,901,554 544,643 558,331 344,414 (470,847) 7,878,095
Expenses 4,794,323 442,940 216,932 453,526 (470,847) 5,436,874
----------- ---------- ----------- ----------- -----------
EBITDAR* 2,107,231 101,703 341,399 (109,112) 2,441,221
Rent 898,912 - - - 898,912
Depreciation 305,120 7,170 30,000 3,000 345,290
Interest 566,586 - - 165,793 732,379
----------- ---------- ----------- ----------- -----------
Income (loss) before
income taxes $ 336,613 94,533 311,399 (277,905) 464,640
=========== ========== =========== =========== ============ ============
</TABLE>
* Earnings before interest, taxes, depreciation, amortization, and rent
Development and corporate revenues and income before taxes in the nine month
period ended September 30, 1999 include the Company's approximate $3 million
share of the gain on sale of its Orlando hotel net of gains, losses, and
impairment provisions relating to other hotel properties sold or held for sale.
Hotel management and franchising revenues and income before taxes in the nine
month period ended September 30, 1999 include termination fees of approximately
$605,000 and $640,000, respectively, relating to the sale of the Orlando hotel.
10
<PAGE>
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Material Changes in Financial Condition.
----------------------------------------
The Company generated positive cash flow from operations of approximately
$2,009,000 during the first nine months of 2000. This included sales of trading
securities of approximately $1,034,000, thus actual cash generated from
operating segments amounted to approximately $975,000, most of such being
generated in the second and third quarters. Property sales generated
approximately $1,185,000 of additional funds in addition to a $550,000 note
receivable which will provide additional cash inflow in future periods. The most
notable of these sales was the 180-room Days Inn in Daytona, Florida (the
"Daytona Hotel") for an aggregate sales price of approximately $3.5 million.
During 1999, the Daytona Hotel contributed net income before taxes of
approximately $108,000 and during 2000 contributed net income before taxes of
approximately $275,000 prior to its sale in September. The Company sold a
40-room hotel property in Wharton, Texas in January 2000 resulting in net cash
proceeds of approximately $267,000. Also, a mortgage obligation was reduced by
$600,000 in connection with the sale. The property continues to operate as a
Country Hearth Inn. In April, the Company sold an Ohio hotel and an unimproved
land parcel for aggregate net proceeds of approximately $314,000. A $671,000
mortgage note was paid off in connection with the hotel sale.
In June 2000, the Company purchased a 40-room Country Hearth Inn in Barnesville,
Georgia which had previously been operated by the Company under an operating
lease. The $1,350,000 purchase price was substantially funded by the assumption
of a mortgage note of approximately $968,000 and the offset of notes receivable
previously due from the seller of approximately $226,000. In August 2000, the
Company purchased a 40-room hotel in Grand Rapids, Michigan and a 42-room hotel
in Dublin, Ohio. Both properties were immediately converted to operate as
Country Hearth Inns and are managed by the Company. The Grand Rapids property
was purchased by a limited liability corporation ("LLC") which is 20% owned by
the Company. The property is operated by the Company under a lease agreement
with the LLC. Due to effective control, the Grand Rapids property is included in
the Company's financial statements on a consolidated basis and the unaffiliated
third party's investment in the LLC is treated as minority interest. The $1.8
million purchase price was essentially funded by the unaffiliated third party
investment of $400,000 and the issuance of a $1.4 million first mortgage note.
Closing costs of approximately $100,000 were funded by the Company. The Dublin
property was purchased by a partnership which is 70% owned by the Company. The
$2 million purchase price and closing costs were funded from partnership cash
and the issuance of a $1.4 million first mortgage note. The Company used
aggregate cash funds of approximately $993,000 for these three hotel
acquisitions.
During the first nine months of 2000, the Company disbursed approximately
$653,000 for originations of new notes receivable. Most of these notes relate to
lease deposits for five new 40-room Country Hearth Inns located in rural
communities in Georgia which will be operated by the Company. Two of these
properties are expected to open in 2000 and the other three are expected to open
in 2001. The Company is committed to expend an additional $360,000 relating to
these properties. A substantial portion of the funds needed for the new notes
receivable was generated from principal receipts on existing notes receivable of
approximately $536,000.
In addition to the acquisitions discussed above, the Company invested
approximately $3,047,000 in capital expenditures during the first nine months of
2000. Most of these expenditures relate to the construction of two new 40-room
Country Hearth Inns in Madison, Indiana and Urbana, Ohio. Both properties are
expected to open in the fourth quarter of 2000. Approximately $1.8 million of
such expenditures were funded by construction loan proceeds.
Additionally, the Company repaid debt obligations, paid preferred stock
dividends, and made distributions to its minority interest partners. Such
expenditures aggregated approximately $1.3 million during the nine months ended
September 30, 2000. The combined effect of these and the other activities
discussed above resulted in a net decrease in cash of approximately $303,000
from December 31, 1999 after making a $400,000 draw on a line of credit
commitment of $1,090,000. The Company has construction loan commitments which
are considered adequate to complete current new construction projects and also
has an unused line of credit commitment of $690,000. Also, several Company owned
or leased properties are held for sale. Such sales, if closed, will provide
additional cash funds. Management believes that the Company's present liquidity
and existing funding commitments are adequate to sustain current operations and
currently projected capital expenditures.
Material Changes in Results of Operations.
------------------------------------------
Comparison of the nine month periods ended September 30, 2000 and 1999 is
distorted by the impact of the June 1999 sale of the Company's Orlando, Florida
hotel. Development and corporate revenues, earnings before interest, taxes,
depreciation, amortization and rent ("EBITDAR"), and income before taxes in the
1999 nine month period included the Company's approximate $3 million share of
the gain on sale. Hotel management and franchising revenues, EBITDAR, and income
11
<PAGE>
before taxes in the 1999 nine month period included termination fees of
approximately $605,000 and $640,000, respectively, relating to the sale of the
Orlando hotel. Excluding the impact of the Orlando hotel sale, nine month 2000
EBITDAR was virtually unchanged from the same period in 1999 and income (loss)
before taxes improved approximately $469,000 versus the same period in 1999.
This is largely attributable to the approximate $579,000 gain on the sale of the
Daytona Hotel.
Third quarter 2000 EBITDAR decreased approximately $465,000 and income (loss)
before taxes decreased approximately $432,000. Such declines resulted from
decreased profitability in all three of the Company's operating segments as
discussed below.
Owned and leased hotel income (loss) before taxes declined by approximately
$550,000 and $87,000 for the three and nine month 2000 periods, respectively,
versus the 1999 periods. Of the 28 hotel properties which were owned and
operated for all of 1999 and 2000 to date, 15 experienced revenue declines in
2000 and revenues in total for the 28 hotels declined 6.7% in the aggregate.
Most of such declines occurred in the third quarter of 2000 resulting in an
approximate $590,000 decrease in EBITDAR. Management is disappointed with these
results and is presently evaluating corrective measures.
Even after the exclusion of the impact of the Orlando hotel sale, hotel
management income (loss) before taxes declined in the three and nine month 2000
periods versus the same periods in 1999. Part of this is attributable to the
decline in revenues of Company owned and leased hotels. Additionally, hotel
management operating expenses increased by approximately $104,000 and $308,000
for the three and nine month periods, respectfully. These increases have
basically eliminated the additional profits expected from the incremental third
party management contracts. Management is also disappointed with these results
and is presently evaluating corrective measures.
Excluding the impact of the Orlando hotel sale, franchising EBITDAR and income
(loss) before taxes increased by approximately $220,000 for the nine month 2000
period versus the same period in 1999. Such improvements resulted from
additional franchise property openings and from a decrease in franchising
payroll and other expenses. Third quarter EBITDAR and net income before taxes
decreased by approximately $180,000 in 2000 versus 1999. This was due to the
declines in Company owned and leased hotel revenues, a $57,000 decrease in
initial fees which can fluctuate significantly from period to period, and a
significant increase in marketing expenditures. Management continues to invest
in the growth of the franchising segment.
Changes in corporate expenses, interest income, and other recurring non-segment
related items were not significant. The primary difference between 2000 and 1999
development and corporate nine month EBITDAR and income (loss) before taxes
relates to the Orlando hotel sale previously discussed. Corporate interest
expense in 2000 has decreased from 1999 and is expected to continue to decrease
as the non-mortgage note balances are reduced.
The Company files income tax returns and recognizes income tax expense (benefit)
on an annual calendar basis. The deferred income tax expense (benefit)
recognized in the 2000 and 1999 interim periods represent management's estimates
of the impact on the annual income tax expense (benefit) which results from such
interim period's operations.
Risk Factors.
-------------
This Form 10-Q contains forward looking statements that involve risks and
uncertainties. Statements contained in this Form 10-Q 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 from the results indicated by such forward
looking statements.
The Company is subject to a number of risks, including the general risks of
investing in real estate, the illiquidity of real estate, environmental risks,
possible uninsured or under insured losses, fluctuations in property taxes,
hotel operating risks, the impact of competition, the difficulty of managing
growth, seasonality, the risks inherent in operating a hotel franchise business
and hotel management business, and the risks involved in hotel renovation and
construction. For a discussion of these and other risk factors, see the "RISK
FACTOR" section contained in the Company's Registration Statement on Form S-3
(File No. 333-37691).
12
<PAGE>
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2000, the Company's obligations included eight variable rate
mortgage notes with aggregate principal balances of $6,950,665 which mature at
various dates through 2015. The Company is exposed to the market risk of
significant increases in future interest rates. Each incremental point in the
prime interest rate would increase the Company's interest expense by
approximately $69,000 per year. This risk is somewhat mitigated in that
inflationary increases in interest rates would theoretically result in increases
in average hotel room rates. Also, significant increases in interest rates would
have a dampening effect on additions of competitive hotels in the Company's
markets.
At September 30, 2000, the Company's unrestricted investment securities included
equity securities valued at $113,952. The Company is exposed to the risk that
such securities will become worthless. The Company's restricted investment
securities also include equity securities. Such restricted securities comprise
the assets of the Company's deferred compensation plan and changes in the value
of such securities have no net impact on the Company's earnings.
The ultimate collection of the Company's notes receivable is subject to various
credit risks. Such risks and the Company's approach to valuing such instruments
is discussed in the Company's December 31, 1999 Form 10-KSB.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During 1999, the Company temporarily suspended payments of Series A preferred
stock dividends due to liquidity requirements created by the seasonal aspects of
the Company's hotel operations. Such preferred dividends are cumulative and
would be required to be paid prior to any distributions to common shareholders.
As of November 10, 2000, a total of $143,750 of Series A preferred dividends
were in arrears. The holders of the Series A preferred stock have tentatively
agreed to forgive the cumulative preferred dividends in arrears in exchange for
the settlement of certain claims the Company has against them.
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(i)(c) 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 May 5, 1998.)
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 has not filed any reports on Form 8-K during the quarter for
which this report is filed.
14
<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.
Buckhead America Corporation
(Registrant)
November 14, 2000 /s/ Douglas C. Collins
------------------------ ------------------------------------------
Date Douglas C. Collins
President and Chief Executive Officer
November 14, 2000 /s/ Robert B. Lee
------------------------- ------------------------------------------
Date Robert B. Lee
Senior Vice President and
Chief Financial and Accounting Officer
15
