FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended April 2, 1995
Commission File Number 0-24822
KAHLER MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1781923
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20 SW 2nd Avenue, Rochester, MN 55902
(Address of principal executive offices) (Zip Code)
(507) 285-2700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (2) 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
The number of shares outstanding of the Registrant's common stock as of April 2,
1995 was:
Common Stock, $.10 par value - 100 shares<PAGE>
<PAGE>
KAHLER MANAGEMENT CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
April 2, 1995
PAGE
NUMBER
Index to Report . . . . . . . . . . . . . . . . . . . . . . 1
Part 1. Financial Information
Balance Sheet -
April 2, 1995 and January 1, 1995 . . . . . . . . . . 2
Statement of Operations -
Three Months Ended April 2, 1995 . . . . . . . . . . . 3
Statement of Cash Flows -
Three Months Ended
April 2, 1995 . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements. . . . . . . . . . . . . . 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition. . . . . 6
Part II. Other Information
Exhibits and Reports on Form 8-K . . . . . . . . . . . . 7
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . 8
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<TABLE>
PART I. FINANCIAL INFORMATION Page 2
KAHLER MANAGEMENT CORPORATION
BALANCE SHEET
<CAPTION>
April 2, January 1,
1995 1995
ASSETS
CURRENT ASSETS
<S> <C> <C> <C> <C>
Cash $ 22,295 $ 22,552
Trade receivables less allowance for doubtful
accounts of $5,300 and $3,000, respectively 167,048 182,926
Inventories 44,278 51,193
Prepaid expenses 167,810 17,392
Total current assets 401,431 274,063
PROPERTY AND EQUIPMENT
Buildings 2,500,000 2,500,000
Equipment 919,478 919,478
Total 3,419,478 3,419,478
Less accumulated depreciation 52,500 -
Total property and equipment 3,366,978 3,419,478
TOTAL ASSETS $ 3,768,409 $ 3,693,541
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 146,170 $ 147,754
Accrued liabilities:
Payroll and payroll related liabilities 135,099 91,586
Sales and income tax 99,251 72,960
Current portion of capital lease 8,797 8,797
Obligations due to affiliate 3,292,400 3,356,682
Total current liabilities 3,681,717 3,677,779
LONG-TERM CAPITAL LEASE OBLIGATION 13,652 15,752
STOCKHOLDER'S EQUITY
Common stock, par value $.10
Authorized - 20,000,000 shares;
Issued and outstanding - 100 10 10
Additional paid-in capital - -
Retained earnings 73,030 -
Total stockholder's equity 73,040 10
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 3,768,409 $ 3,693,541
See Notes to Financial Statements
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION Page 3
KAHLER MANAGEMENT CORPORATION
STATEMENT OF OPERATIONS
<CAPTION>
Three Months
Ended
April 2,
1995
REVENUE
<S> <C> <C>
Rooms $ 786,216
Food and beverage 448,116
Telephone and other 45,008
Total revenue 1,279,340
OPERATING COSTS AND EXPENSES
Rooms 177,359
Food and beverage 349,471
Utilities, maintenance, administrative,
property taxes, insurance and other 483,562
Depreciation 52,500
Total operating costs and expenses 1,062,892
GROSS OPERATING PROFIT 216,448
Interest expense 72,227
Management fee 38,380
INCOME FROM OPERATIONS BEFORE INCOME TAXES 105,841
Provision for income taxes 32,811
NET INCOME (Note 5) $ 73,030
See Notes to Financial Statements
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION Page 4
KAHLER MANAGEMENT CORPORATION
STATEMENT OF CASH FLOWS
<CAPTION>
Three Months
Ended
April 2,
1995
OPERATIONS:
<S> <C> <C>
Net income $ 73,030
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 52,500
Change in current assets and current liabilities
Receivables 15,878
Inventories 6,915
Prepaid expenses (150,418)
Accounts payable (1,584)
Accrued liabilities 69,804
Net cash provided by operating activities 66,125
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment -
Net cash used in investing activities -
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to affiliate (64,282)
Principal payments on capital lease obligation (2,100)
Net cash used in financing activities (66,382)
DECREASE IN CASH (257)
CASH AT BEGINNING OF THE PERIOD 22,552
CASH AT END OF THE PERIOD $ 22,295
See Notes to Financial Statements
</TABLE>
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Page 5
PART I. FINANCIAL INFORMATION
KAHLER MANAGEMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended
April 2, 1995
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financialinformation and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, except as disclosed herein, there has been no
material change in the information disclosed in the notes to consolidated
financial statements included in the Annual Report on Form 10-K of Kahler
Management Corporation (the Company) for the year ended January 1, 1995.
In the opinion of management, all adjustments considered necessary for a
fair presentation have been included. Operating results for the three
months ended April 2, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995.
2. All comparative data reflects application of consistent accounting
principles and contains no prior period adjustments.
3. Supplemental disclosure of cash flow information.
Cash paid for:
Three Months Ended
April 2, 1995
Interest paid $72,227
4. The Company is a wholly-owned subsidiary of Kahler Realty Corporation
(Realty). Realty continues to study the possibility of converting to a
real estate investment trust simultaneously with a public offering of its
common shares. If this restructuring is successful, the Company would
transfer the Green Oaks property to an affiliate of Realty and would
receive a transfer of hotel management and other non-real estate related
assets from Realty to enable Realty to separate its hotels from its hotel
management operations and non-real estate businesses. In addition, Realty
would distribute by dividend approximately 90% of the common stock of the
Company to Realty's shareholders.
5. No income per common share is presented since the Company has only one
shareholder, Realty.
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Page 6
PART I. FINANCIAL INFORMATION
KAHLER MANAGEMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended
April 2, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
General
The management's discussion and analysis of financial condition and results of
operations set forth below follows the presentation of the Company's Statement
of Operations. This discussion should be read in conjunction with this
statement and the other Financial Statements and Notes thereto appearing in
this Form 10-Q.
On December 31, 1994 the Company acquired the Green Oaks Inn and Conference
Center.
This hotel with 284 rooms is located in Fort Worth, Texas. With 16 conference
rooms that can accommodate up to 1,000 persons, the hotel primarily seeks to
attract conferences and group meetings as well as individual business
travelers. The hotel leases the site where it is located under a ground lease
that expires December 2014.
During the first quarter of 1995 the Company had total revenues of $1,279,340.
Room revenue was $786,216 resulting from an average daily room rate of $50.89
and occupancy of 67%. The revenue per available room was $34.08. Food and
beverage revenues were $448,116 and telephone and other were $45,008.
The Company, during the first quarter of 1995, had total operating cost and
expenses, prior to depreciation, of $1,010,392. This resulted in a gross
operating margin of 21.0%
Interest expense relates primarily to the note payable to Realty which carries
an interest rate equal to the prime lending rate.
Management fee was $38,380 for the first quarter of 1995. This represents an
allocation of corporate expenses which is computed at 3% of total revenue and
is paid to Realty.
Provision for income represents the Company's estimated portion of the overall
income tax cost for Realty and Realty's consolidated group.
The Company had a net income for the first quarter of 1995 of $73,030.
<PAGE>
Page 7
PART I. FINANCIAL INFORMATION
KAHLER MANAGEMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended
April 2, 1995
Liquidity and Capital Resources
Cash Flows
Net cash provided by operating activities was $66,125. The Company's
operating income was the primary contributor to this source of cash.
Financing
The Company's primary source of financing is Realty, the Company's parent
corporation. The two companies have a lending arrangement whereby cash can be
advanced or paid back on a daily basis as evidenced by a demand note between
Realty and the Company. Realty charges the Company an interest rate equal to
the prime lending rate. During the first quarter of 1995, the Company made
payments on the note to Realty of $64,282.
Other
The Company is a wholly-owned subsidiary of Realty. Realty continues to
study the possibility of converting to a real estate investment trust
simultaneously with a public offering of its common shares. If this
restructuring is successful, the Company would transfer the Green Oaks
property to an affiliate of Realty and would receive a transfer of hotel
management and other non-real estate related assets from Realty to enable
Realty to separate its hotels from its hotel management operations and
non-real estate businesses. In addition, Realty would distribute by dividend
approximately 90% of the common stock of the Company to Realty's shareholders.
The Company is in the discovery state of litigation with a telecommunications
company relating to disputed unremitted telephone revenue and fees at the
Company's hotel. The Company has denied all claims and has made counter
claims relating to breach of contract and intends to pursue all available
alternatives. The outcome of this dispute is uncertain.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
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Page 8
KAHLER MANAGEMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
Three Months Ended
April 2, 1995
SIGNATURE
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 on September 25, 1995.
KAHLER MANAGEMENT CORPORATION
Dated: September 25, 1995 Harold W. Milner Sigd.
Harold W. Milner
President, CEO
Dated: September 25, 1995 Paul R. Tieskoetter Sigd.
Paul R. Tieskoetter
Controller and Treasurer (principal
financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Financial Data Schedule, 10Q First quarter 1995
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-2-1995
<PERIOD-END> APR-2-1995
<CASH> 22295
<SECURITIES> 0
<RECEIVABLES> 172348
<ALLOWANCES> 5300
<INVENTORY> 44278
<CURRENT-ASSETS> 401431
<PP&E> 3419478
<DEPRECIATION> 52500
<TOTAL-ASSETS> 3768409
<CURRENT-LIABILITIES> 3681717
<BONDS> 0
<COMMON> 10
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3768409
<SALES> 1279340
<TOTAL-REVENUES> 1279340
<CGS> 0
<TOTAL-COSTS> 1062892
<OTHER-EXPENSES> 38380
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72227
<INCOME-PRETAX> 105841
<INCOME-TAX> 32811
<INCOME-CONTINUING> 73030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73030
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
