-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJ7/Q7N2JhhFhRrt7cXvKDDiIwlje7fWT0I4eYTPy26ndwTvfqhF1mGwALXYfrmN hkrzf6BPYj12+lZE2tSG8g== 0000930661-97-000317.txt : 19970222 0000930661-97-000317.hdr.sgml : 19970222 ACCESSION NUMBER: 0000930661-97-000317 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUFFTON CORP CENTRAL INDEX KEY: 0000351220 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 751732794 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09822 FILM NUMBER: 97533381 BUSINESS ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 BUSINESS PHONE: 8173324761 MAIL ADDRESS: STREET 1: 226 BAILEY AVE STE 101 CITY: FORT WORTH STATE: TX ZIP: 76107 FORMER COMPANY: FORMER CONFORMED NAME: BUFFTON OIL & GAS INC DATE OF NAME CHANGE: 19830405 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the quarterly period ended December 31, 1996 or - --- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to _____________ Commission file number 1-9822 BUFFTON CORPORATION ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) Delaware 75-1732794 - ------------------------------- ------------------------------- (State or Other Jurisdiction of (IRS Employer Identification No.) Incorporation or Organization) 226 Bailey Avenue, Suite 101, Fort Worth, Texas 76107 ----------------------------------------------------- (Address and zip code of principal executive offices) (817) 332-4761 ------------------------------------------------- (Registrant's Telephone Number, Including Area Code) ------------------------------------------------------------------------- (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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes 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. Number of shares outstanding at: Class February 11, 1997 - ---------------------------- -------------------------- Common stock, $.05 par value 6,678,528 1 BUFFTON CORPORATION Index -----
Page ---- Part I - Financial Information............................................ 3 Item 1 - Financial Statements............................................. 3 Consolidated Condensed Balance Sheets December 31, 1996 (Unaudited) and September 30, 1996.................................................. 3 Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended December 31, 1996 and 1995........................... 4 Consolidated Condensed Statements of Cash Flow (Unaudited) Three Months Ended December 31, 1996 and 1995........................... 5 Supplemental Disclosures of Cash Flow Information (Unaudited)............. 5 Notes to Consolidated Condensed Financial Statements (Unaudited).......... 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 9 Part II - Other Information............................................... 12 Signatures................................................................ 13
2 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements BUFFTON CORPORATION Consolidated Condensed Balance Sheets -------------------------------------
December 31, September 30, 1996 1996 --------- --------- (Unaudited) Assets (In thousands) ------ Current assets: Cash and cash equivalents................................... $ 1,440 $ 1,659 Accounts receivable, net of allowance for doubtful accounts of $28,000 and $35,000, respectively............................................. 2,786 3,370 Inventories................................................. 1,864 1,396 Prepaid and other current assets............................ 592 492 --------- --------- Total current assets..................................... 6,682 6,917 Property, plant and equipment, at cost: Land, building and improvements............................. 12,615 12,257 Less: Accumulated depreciation and amortization............ (2,830) (2,626) --------- --------- Net property, plant and equipment........................ 9,785 9,631 Patents, net of accumulated amortization of $1,569,000 and $1,529,000, respectively.................. 1,411 1,451 Goodwill, net of amortization of $935,000 and $845,000, respectively................................... 4,030 4,120 Long-term notes receivable.................................... 540 540 Other assets, net............................................. 743 505 --------- --------- $ 23,191 $ 23,164 --------- --------- Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Current portion of long-term debt.......................... $ 187 $ 187 Accounts payable........................................... 1,306 1,152 Accrued liabilities........................................ 1,138 1,524 Income taxes............................................... 284 311 --------- --------- Total current liabilities................................ 2,915 3,174 Long-term debt................................................ 2,446 2,493 Deferred income taxes......................................... 4 4 --------- --------- Total liabilities........................................ 5,365 5,671 --------- --------- Stockholders' equity: Preferred stock $.01 par value; 5,000,000 shares authorized; no shares issued and outstanding............. - - Common stock $.05 par value; 30,000,000 shares authorized; outstanding shares 6,726,878................. 337 337 Additional paid-in capital.................................. 14,360 14,354 Retained earnings........................................... 3,271 3,158 Treasury stock, at cost, 73,350 and 183,350 shares, respectively............................. (142) (356) --------- --------- Total stockholders' equity............................... 17,826 17,493 --------- --------- $ 23,191 $ 23,164 --------- ---------
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 3 BUFFTON CORPORATION Consolidated Condensed Statements of Operations (Unaudited) ----------------------------------------------------------
Three Months Ended December 31, ----------------------- 1996 1995 --------- --------- (In thousands, except per share amounts) Net revenues $ 5,969 $ 5,336 --------- --------- Costs and expenses: Cost of goods sold (exclusive of depreciation).. 1,980 1,889 Selling, general and administrative............. 3,415 2,693 Depreciation and amortization................... 331 277 Interest........................................ 55 35 --------- --------- Total costs and expenses....................... 5,781 4,894 --------- --------- Income before income taxes....................... 188 442 Income tax provision............................. 75 125 --------- --------- Net income....................................... 113 317 --------- --------- Net income per average common share.............. $ .02 $ .06 --------- --------- Weighted average common shares outstanding 6,593 5,685 --------- ---------
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 4 BUFFTON CORPORATION Consolidated Condensed Statements of Cash Flow (Unaudited) ----------------------------------------------------------
Three Months Ended December 31, --------------------------- 1996 1995 --------- --------- (In thousands) Net cash provided by operating activities..... $ 324 $ 614 --------- --------- Cash flows from investing activities: Additions to property, plant and equipment.. (358) (468) Increase in other assets.................... (138) (104) --------- --------- Net cash used in investing activities......... (496) (572) --------- --------- Cash flows from financing activities: Repayments of long-term debt................ (47) - --------- --------- Net cash provided by financing activities..... (47) - --------- --------- Net increase (decrease) in cash............... (219) 42 Cash at beginning of period................... 1,659 7 --------- --------- Cash at end of period......................... $ 1,440 $ 49 --------- ---------
Supplemental Disclosures of Cash Flow Information (Unaudited) ------------------------------------------------------------- Supplemental schedule of cash payments:
Three Months Ended December 31, --------------------------- 1996 1995 --------- --------- (In thousands) Cash paid for: Interest............................... $ 55 $ 35 Income taxes........................... 121 5
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 5 BUFFTON CORPORATION Notes to Consolidated Condensed Financial Statements (Unaudited) ----------------------------------------------------- --------- Note A - ------ In the opinion of management, the accompanying consolidated condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Buffton Corporation (the Company), as of December 31, 1996, and the results of its operations and its cash flows for the three month periods ended December 31, 1996 and 1995. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1996 Buffton Corporation Form 10-K. Note B - ------ The results of operations for the three month period ended December 31, 1996 are not necessarily indicative of the results to be expected for the full year. Note C - ------ Net income per share has been computed on the basis of the weighted average number of common shares outstanding. Note D - ------ Inventories are as follows:
December 31, September 30, 1996 1996 ------------ ------------ (In thousands) Raw materials $ 1,238 $ 1,140 Work in process 346 86 Finished goods 280 170 ------------ ------------ $ 1,864 $ 1,396 ------------ ------------
Note E - ------ Effective January 1, 1996, the Company entered into an agreement to purchase the assets of Cabo Tacobar One, Ltd., a Mexican restaurant concept with Central and South American influences located in Houston, Texas, for $589,000 in cash, 375,000 shares of the Company's common stock (with an estimated fair market value of $656,000), and a one year option to purchase an additional 150,000 shares of the Company's common stock at a price of $2.00 per share. Additionally, the Company issued 76,500 shares of its common stock for commissions incurred in connection with the acquisition which resulted in increased acquisition costs of $153,000. Excess of purchase price over fair value of net tangible assets acquired, recorded as 6 Goodwill, approximates $1,300,000 and is being amortized on a straight line basis over 15 years. Effective January 1, 1996, the Company also entered into an agreement to purchase the assets and assume certain liabilities of the Stockyards Hotel, located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the Company's common stock (with an estimated fair market value of $788,000) and the refinancing of a $1,600,000 bank term loan. Under this agreement, the Company has guaranteed, until March 15, 1997, a sales price of $2.05 per share for any of this stock that may be sold. At December 31, 1996, no liability had been incurred under the guarantee agreement. These acquisitions were accounted for under purchase accounting and are included in the Company's results of operations beginning on the acquisitions' effective date of January 1, 1996. Unaudited proforma results from continuing operations, as if the acquisitions had occurred at the beginning of fiscal 1996 are as follows:
Three Months Ended December 31, 1995 -------- Revenues................................. $6,134 Net income from operations............... 360 Primary income per average common share.. .06
Note F - ------ During March 1992, the United States Environmental Protection Agency (EPA), issued a Record of Decision (ROD) with respect to the Company's Superfund Site in Vestal, New York. An Administrative Order for Remedial Design and Remedial Action was issued on October 1, 1992. The ROD requires the Company to construct a water treatment facility at the site and to pump contaminated ground water from bedrock and overburden extraction wells for 15 to 30 years until remediation goals were met. In December 1992, the Company's environmental consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP was submitted to the EPA on October 21, 1993. During February 1994, the Company received comments from the EPA with respect to the revised RDWP and the Company's environmental consultants submitted a response. The EPA approved the revised RDWP in October 1994. On November 14, 1994, engineering design and related fieldwork was begun in order to meet the specifications of the revised RDWP. During the three months ended December 31, 1996 and 1995, $129,000 and $135,000, respectively, were incurred for work related to the engineering design. These costs were capitalized when incurred because the remedy would prevent further environmental contamination with respect to the contaminated ground water being pumped from the extraction wells and improve the property compared with its condition when acquired by the Company. Due to concerns about the correctness of the remedy provided for in the ROD, additional fieldwork was performed and in June 1995, an RDWP Addendum was prepared and submitted to the EPA. The Company received comments from the EPA regarding this Addendum, and the Company's environmental consultants submitted a response shortly thereafter. On August 24, 1995, the Company and its legal and environmental consultants met with officials of the EPA and agreed on additional fieldwork deemed necessary by the EPA to support 7 the Company's position regarding the RDWP Addendum. At this meeting, officials of the EPA agreed the remedy needed to be modified and that certain requirements under the existing ROD needed to be eliminated or reduced in scope. However, the EPA has not approved any changes to the remedy and amended the ROD. Additional fieldwork provided for in the RDWP Addendum has been conducted at the site and resulted in the formulation of a revised remedy. On December 19, 1995, the Company and its legal and environmental consultants presented to the EPA the RDWP Addendum and the recommended changes to the ROD in the form of a revised remedy. The revised remedy was favorably received by the EPA and is currently being reviewed. The revised remedy would eliminate certain requirements of the existing ROD and would primarily include removing and treating contaminated soil, significantly reducing the time period for remediation. Initial estimates of the revised remedy indicate initial costs of approximately $800,000 to $900,000, and ongoing maintenance costs of approximately $200,000 to $250,000 in the aggregate. The costs would be incurred over a one to two year period after the ROD is amended with the ongoing maintenance costs being incurred over a five year period after initial cost completion. If the EPA amends the ROD and adopts the revised remediation treatment, the Company would, at the date of amendment, expense the estimated future costs of implementing this alternative as well as all prior costs incurred, approximating $797,000 through December 31, 1996, associated with the implementation of the original ROD. On July 16, 1996, the Company and its legal and environmental representatives met with the EPA to review the EPA's written response to the revised remedy presented in December 1995. As a result of this meeting, a review of a more cost efficient remedy is being discussed with the EPA. The EPA now estimates that a revised ROD can be issued in early 1997. Note G - ------ The Company is a party to various legal actions which are in the aggregate immaterial, and due to the nature of the Company's business, it could be a party in other legal or administrative proceedings arising in the ordinary course of business. While occasional adverse settlements or resolutions may occur and negatively impact earnings in the year of settlement, it is the opinion of management that their ultimate resolution will not have a material adverse effect on the Company's financial position. Note H - ------ In March 1996, one of the Company's subsidiaries entered into a one year financing agreement with a bank to replace its existing line of credit. The commitment consists of a $2,000,000 revolving line of credit, all of which was available for borrowing at December 31, 1996, and is secured by the accounts receivable and inventory of the subsidiary. The terms of the finance agreement provide for interest to be paid monthly at a floating rate equal to the established prime rate. The agreement also provides for a commitment fee of 0.25% per annum of the unused portion of the facility. 8 BUFFTON CORPORATION PART I - FINANCIAL INFORMATION - ------------------------------ Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL INFORMATION At December 31, 1996, the Company consists of operations in two principal segments, electrical products and hospitality group. During the year ended September 30, 1996 and the three months ended December 31, 1996, the Company entered into the following acquisition transactions. Effective January 1, 1996, the Company entered into agreements to purchase the assets of Cabo Tacobar One, Ltd. (Cabo), located in Houston, Texas and to purchase the assets and assume certain liabilities related to the Stockyards Hotel (SYH), located in Fort Worth, Texas. See Liquidity and Capital Resources in this section and Note E of Notes to Consolidated Condensed Financial Statements for details of the acquisitions. FACTORS THAT MAY AFFECT FUTURE RESULTS Certain matters discussed herein are forward-looking statements about the business, financial condition and prospects of the Company. The actual results could differ materially from those indicated by such forward-looking statements because of various risks and uncertainties. Such risks and uncertainties may include, but are not limited to regional and national economic conditions, changes in customer demand for products offered by the Company, and other matters that may adversely affect the availability of products and pricing, state and federal regulatory environment, possible future acquisitions or dispositions, amendments to the Record of Decision issued by the Environmental Protection Agency (see Liquidity and Capital Resources) and other risks indicated in the Company's previous filings with the Securities and Exchange Commission. The Company cannot control these risks and uncertainties, and in many cases, cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward- looking statements. RESULTS OF OPERATIONS Consolidated net revenues in 1996 increased 12% compared to 1995. Electrical products revenues decreased 5% in 1996 versus 1995 due to the timing of shipments, made under contract, of power distribution modules incorporating surge suppression for integration into a customer's sorter equipment. However, management expects sales levels for electrical products for fiscal 1997 to increase over 1996 levels. Hospitality Division revenues in 1996 increased 52% from the 1995 period due to the inclusion of the results of operations of Cabo and SYH effective January 1, 1996. Revenues for the hospitality group are expected to increase during the remainder of fiscal 1997 as a second Cabo location is expected to open during the third quarter of fiscal 1997 and a destination food and beverage restaurant at SYH is expected to open during the fourth quarter of fiscal 1997. The expected increases in hospitality group revenues will be partially offset by the sale of 441 Bourbon Street in fiscal 1996. Consolidated total costs and expenses during 1996 increased 18% compared to 1995. Consolidated costs of sales increased 5% during 1996 versus 1995. As a percent of related revenues, these costs were 33% in 1996 versus 35% in 1995. Electrical products cost of sales decreased 4% in 1996 compared to 1995. These costs as a percent of revenue were 9 approximately 41% in 1996 and 1995. The decrease in absolute dollars was due to decreased sales. Cost of sales related to the Hospitality Division in 1996 increased 37% compared to 1995. This increase is due to the inclusion of the results of operations of Cabo and SYH effective January 1, 1996. Consolidated selling, general and administrative expenses increased 27% during 1996 versus 1995. The absolute dollar increase in these expenses is due to increased sales levels. As a percent of revenue, these expenses were 57% during 1996 versus 50% in 1995. Electrical products selling, general and administrative expenses increased 10% in 1996 compared to 1995. The increase in selling, general and administrative expense associated with the electrical products segment is due to the 1995 results including the reversal of reserves in the amount of $146,000 related to favorable developments of certain state tax claims. The expenses associated with the hospitality group in 1996 increased 33% compared to 1995 due to the inclusion of the results of operations of Cabo and SYH effective January 1, 1996 and to increased expenses related to development of food concepts and management. Consolidated depreciation and amortization expense increased 19% during 1996 compared to 1995, primarily as a result of the previously discussed acquisition of Cabo and SYH. The increase in interest expense to $55,000 for 1996 from $35,000 in 1995 is primarily due to the refinancing of a $1,600,000 bank term loan assumed in connection with the acquisition of SYH and the borrowing of $1,200,000 in March 1996 from an insurance company, secured by a deed of trust on a commercial office building located in Fort Worth, Texas. During the three months ended December 31, 1996, the Company reported income from operations before income taxes of $188,000 versus $442,000 in 1995. This decrease is due to the Company's electrical products operation reporting lower profit in 1996 compared to 1995. This decrease was due to lower sales levels and higher selling, general and administrative costs previously discussed. Increased expenses related to development of food concepts and management for the hospitality group also negatively impacted net income. RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES During March 1992, the United States Environmental Protection Agency (EPA), issued a Record of Decision (ROD) with respect to the Company's Superfund Site in Vestal, New York. An Administrative Order for Remedial Design and Remedial Action was issued on October 1, 1992. The ROD requires the Company to construct a water treatment facility at the site and to pump contaminated ground water from bedrock and overburden extraction wells for 15 to 30 years until remediation goals were met. In December 1992, the Company's environmental consultants prepared and submitted a Remedial Design Work Plan (RDWP) to the EPA. The EPA issued comments on the RDWP on October 1, 1993, and a revised RDWP was submitted to the EPA on October 21, 1993. During February 1994, the Company received comments from the EPA with respect to the revised RDWP and the Company's environmental consultants submitted a response. The EPA approved the revised RDWP in October 1994. On November 14, 1994, engineering design and related fieldwork was begun in order to meet the specifications of the revised RDWP. 10 During the three months ended December 31, 1996 and 1995, $129,000 and $135,000, respectively, were incurred for work related to the engineering design. These costs were capitalized when incurred because the remedy would prevent further environmental contamination with respect to the contaminated ground water being pumped from the extraction wells and improve the property compared with its condition when acquired by the Company. Due to concerns about the correctness of the remedy provided for in the ROD, additional fieldwork was performed and in June 1995, an RDWP Addendum was prepared and submitted to the EPA. The Company received comments from the EPA regarding this Addendum, and the Company's environmental consultants submitted a response shortly thereafter. On August 24, 1995, the Company and its legal and environmental consultants met with officials of the EPA and agreed on additional fieldwork deemed necessary by the EPA to support the Company's position regarding the RDWP Addendum. At this meeting, officials of the EPA agreed the remedy needed to be modified and that certain requirements under the existing ROD needed to be eliminated or reduced in scope. However, the EPA has not approved any changes to the remedy and amended the ROD. Additional fieldwork provided for in the RDWP Addendum has been conducted at the site and resulted in the formulation of a revised remedy. On December 19, 1995, the Company and its legal and environmental consultants presented to the EPA the RDWP Addendum and the recommended changes to the ROD in the form of a revised remedy. The revised remedy was favorably received by the EPA and is currently being reviewed. The revised remedy would eliminate certain requirements of the existing ROD and would primarily include removing and treating contaminated soil, significantly reducing the time period for remediation. Initial estimates of the revised remedy indicate initial costs of approximately $800,000 to $900,000, and ongoing maintenance costs of approximately $200,000 to $250,000 in the aggregate. The costs would be incurred over a one to two year period after the ROD is amended with the ongoing maintenance costs being incurred over a five year period after initial cost completion. If the EPA amends the ROD and adopts the revised remediation treatment, the Company would, at the date of amendment, expense the estimated future costs of implementing this alternative as well as all prior costs incurred, approximating $797,000 through December 31, 1996, associated with the implementation of the original ROD. On July 16, 1996, the Company and its legal and environmental representatives met with the EPA to review the EPA's written response to the revised remedy presented in December 1995. As a result of this meeting, a review of a more cost efficient remedy is being discussed with the EPA. The EPA now estimates that a revised ROD can be issued in early 1997. Subsequent to December 31, 1996, the Company began construction on a second Cabo unit to be located in the historical district of downtown Houston, Texas. The unit is expected to open during the third quarter of fiscal 1997. Plans for a new restaurant to be located at SYH are being finalized and it is expected to open during the fourth quarter of fiscal 1997. Capital expenditures for these two projects are expected to approximate $1,750,000 and are expected to be funded from existing cash and operating cash flow. 11 BUFFTON CORPORATION PART II - OTHER INFORMATION --------------------------- Item 1. - Legal Proceedings None Item 6. - Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K None 12 BUFFTON CORPORATION SIGNATURES ---------- Pursuant to 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. BUFFTON CORPORATION (Registrant) By: /s/ ROBERT H. MCLEAN ------------------------------- Chairman of the Board and President February 14, 1997 ----------------- By: /s/ ROBERT KORMAN ------------------------------- Vice President and Chief Financial Officer February 14, 1997 ----------------- 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 1,440 0 2,786 28 1,864 6,682 9,785 (2,830) 23,191 2,915 0 0 0 337 17,489 23,191 5,969 5,969 1,980 5,781 0 0 55 188 75 113 0 0 0 113 0.02 0
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