-----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, TUiiM6PwRdt1dUcGrJufumFEWLo+Kk3WwncnWVofvlkvQxNmybT6Zye/hBhF34Xx +tVRT3GR2DOd6evfJpPBRg== 0000930661-96-001021.txt : 19960814 0000930661-96-001021.hdr.sgml : 19960814 ACCESSION NUMBER: 0000930661-96-001021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96610003 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 June 30, 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 June 30, 1996 - ---------------------------- -------------------------------- Common stock, $.05 par value 6,726,878 1 BUFFTON CORPORATION Index
Page ---- Part I - Financial Information............................................ 3 Item 1 - Financial Statements............................................. 3 Consolidated Condensed Balance Sheets (Unaudited) June 30, 1996 and September 30, 1995.................................................. 3 Consolidated Condensed Statements of Operations (Unaudited) Three Months Ended June 30, 1996 and 1995............................... 4 Consolidated Condensed Statements of Operations (Unaudited) Nine Months Ended June 30, 1996 and 1995................................ 5 Consolidated Condensed Statements of Cash Flow (Unaudited) Nine Months Ended June 30, 1996 and 1995................................ 6 Supplemental Disclosures of Cash Flow Information (Unaudited)............. 6 Notes to Consolidated Condensed Financial Statements (Unaudited).......... 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 11 Part II - Other Information............................................... 15 Signatures................................................................ 16
2 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements BUFFTON CORPORATION Consolidated Condensed Balance Sheets
June 30, September 30, 1996 1995 ----------- -------------- (Unaudited) (In thousands) Assets ------ Current assets: Cash and cash equivalents................................... $ 131 $ 7 Accounts receivable, net of allowance for doubtful accounts of $98,000 and $75,000, respectively............................................. 3,671 2,893 Inventories................................................. 1,732 2,031 Prepaid and other current assets............................ 449 498 ------- ------- Total current assets..................................... 5,983 5,429 ------- ------- Property and equipment, at cost.............................. 11,502 7,529 Less: Accumulated depreciation and amortization............ (2,446) (2,062) ------- ------- Net property and equipment................................... 9,056 5,467 ------- ------- Patents, net of accumulated amortization of $1,509,000 and $1,358,000, respectively................... 1,471 1,617 Goodwill, net of amortization of $871,000 and $754,000, respectively.................................... 4,112 3,503 Deferred income taxes........................................ 590 590 Long-term note receivable.................................... 300 350 Other assets, net............................................ 1,080 268 ------- ------- $22,592 $17,224 ======= ======= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Current portion of long-term debt........................... $ 188 $ - Accounts payable............................................ 803 1,001 Accrued liabilities......................................... 1,102 1,368 Income taxes................................................ 549 236 ------- ------- Total current liabilities.................................. 2,642 2,605 ------- ------- Long - term debt............................................. 2,540 - ------- ------- 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; 6,726,878 and 5,685,378 shares outstanding, respectively.. 336 284 Additional paid-in capital.................................. 14,446 12,571 Retained earnings........................................... 2,628 1,764 ------- ------- Total stockholders' equity................................. 17,410 14,619 ------- ------- $22,592 $17,224 ======= =======
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 3 BUFFTON CORPORATION Consolidated Condensed Statements of Operations (Unaudited)
Three Months Ended June 30, -------------- 1996 1995 ---- ---- (In thousands, except per share amounts) Net revenues..................................... $6,870 $5,032 ------ ------ Costs and expenses: Cost of goods sold (exclusive of depreciation).. 2,324 1,535 Selling, general and administrative............. 3,590 2,834 Depreciation and amortization................... 337 243 Interest........................................ 77 27 ------ ------ Total costs and expenses....................... 6,328 4,639 ------ ------ Income from continuing operations before income taxes.................................... 542 393 Income tax provision............................. 204 137 ------ ------ Income from continuing operations................ 338 256 Utilization of income tax benefit related to loss on disposal of discontinued operation - 362 ------ ------ Net income....................................... $ 338 $ 618 ====== ====== Income per average common share: Continuing operations........................... $ .05 $ .05 Discontinued operation.......................... - .07 ------ ------ Net income...................................... $ .05 $ .12 ====== ====== Weighted average common shares outstanding....... 6,727 5,520 ====== ======
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 4 BUFFTON CORPORATION Consolidated Condensed Statements of Operations (Unaudited)
Nine Months Ended June 30, ------------------ 1996 1995 ---- ---- (In thousands, except per share amounts) Net revenues...................................... $18,178 $14,200 ------- ------- Costs and expenses: Cost of goods sold (exclusive of depreciation)... 6,231 4,341 Selling, general and administrative.............. 9,510 8,092 Depreciation and amortization.................... 992 725 Interest......................................... 172 99 ------- ------- Total costs and expenses........................ 16,905 13,257 ------- ------- Income from continuing operations before income taxes..................................... 1,273 943 Income tax provision.............................. 409 302 ------- ------- Income from continuing operations................. 864 641 Discontinued operation: Loss from operations, net of income tax benefit of $107,000..................................... - (199) Loss on disposal, net of income tax benefit of $527,000..................................... - (2,541) ------- ------- Loss from discontinued operation................. - (2,740) ------- ------- Net income (loss)................................. $ 864 $(2,099) ======= ======= Income (loss) per average common share: Continuing operations............................ $ .14 $ .12 Discontinued operation........................... - (.51) ------- ------- Net income (loss)................................ $ .14 $ (.39) ======= ======= Weighted average common shares outstanding........ 6,360 5,409 ======= =======
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 5 BUFFTON CORPORATION Consolidated Condensed Statements of Cash Flow (Unaudited) Nine Months Ended June 30, -------------------- 1996 1995 ------- ------- (In thousands)
Net cash used in operating activities.......... $ 1,347 $ 379 ------- ------- Cash flows from investing activities: Additions to property, plant and equipment... (1,005) (694) Construction in progress, primarily tooling.. - (204) Additions to other assets.................... (339) (427) Proceeds from sale of operating assets....... - 3,750 Acquisitions, net of cash acquired........... (1,007) - ------- ------- Net cash provided by investing activities...... (2,351) 2,425 ------- ------- Cash flows from financing activities: Additions to long-term debt.................. 1,200 - Repayments of long-term debt................. (72) (3,329) ------- ------- Net cash used in financing activities.......... 1,128 (3,329) ------- ------- Net increase in cash........................... 124 (525) Cash at beginning of period.................... 7 3,196 ------- ------- Cash at end of period.......................... $ 131 $ 2,671 ======= =======
Supplemental Disclosures of Cash Flow Information Supplemental cash flow information:
Nine Months Ended June 30, -------------- 1996 1995 ------ ------ (In thousands) Cash paid for: Interest................................... $ 87 $ 99 Income taxes............................... 48 52 Noncash investing and financing activities: Fair value of assets acquired.............. $4,660 $ - Liabilities assumed........................ 1,754 - Stock issued............................... 1,804 - ------ ----- Cash paid.................................. 1,102 - Less: Cash acquired....................... 95 - ------ ----- Net cash paid for acquisitions............. $1,007 $ - ====== =====
See accompanying notes to unaudited Consolidated Condensed Financial Statements. 6 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 June 30, 1996, the results of its operations for the three and nine month periods ended June 30, 1996 and 1995 and its cash flows for the nine month periods ended June 30, 1996 and 1995. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1995 Buffton Corporation Annual Report on Form 10-K. Note B ------ The results of operations for the three and nine month periods ended June 30, 1996 are not necessarily indicative of the results to be expected for the full year. Note C ------ Net income (loss) per share has been computed on the basis of the weighted average number of common shares outstanding. Note D ------ Inventories are as follows:
June 30, September 30, 1996 1995 ------ ------ (In thousands) Raw materials.......................... $1,013 $1,450 Work in process........................ 487 323 Finished goods......................... 232 258 ------ ------ $1,732 $2,031 ====== ======
7 Note E ------ By approval of the Company's Board of Directors in December 1994, in a transaction effective January 1, 1995, the Company sold the operations of Flo Control, Inc. (Flo Control), headquartered in Burbank, California. The purchaser of these operations was Mr. Russell J. Sarno, President of Flo Control and a board member of the Company. Mr. Sarno purchased virtually all of the assets of Flo Control for $3,100,000 in cash and assumed $800,000 of Flo Control's liabilities. As a condition of the sale, Mr. Sarno agreed to purchase Flo Control's 95% ownership interest in the Florida Realty Joint Venture for $150,000 in cash and assume the related non-recourse mortgage approximating $2.3 million. In connection with these transactions, Flo Control's secondary containment product line was sold to Mr. Pat Hopkins, an unrelated third party, for a $500,000 note. The note bears interest at 8% per annum. Payments are due semiannually beginning June 30, 1995 and continuing through December 31, 1999 in the amount of $50,000 plus earned interest. The note is secured by the assets sold and the personal guaranty of an unrelated third party individual. As a result of the above transactions, the Company recognized a loss on disposal of $2,903,000, net of income tax benefit, during the three months ended December 31, 1994. The sale of Flo Control was accounted for as a discontinued operation. The cash proceeds from the sale were used to reduce the company's outstanding debt with its lender. Flo Control's revenues for the three months ended December 31, 1994 were $2,435,000. 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 required 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 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 nine months ended June 30, 1996 and the year ended September 30, 1995, $229,000 and $430,000, 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 8 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 the additional testing 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. Since this meeting, 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 will be reviewed. The revised remedy eliminates certain requirements of the existing ROD and significantly reduces the time period for remediation. Initial estimates of the revised remedy indicate capital costs of approximately $800,000 to $900,000, and ongoing maintenance costs of approximately $200,000 to $250,000 in the aggregate. The capital 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 capital cost completion. 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 possibly more attractive and cost efficient remedy is being discussed with the EPA. The EPA now estimates that a revised ROD can be issued by the end of calendar 1996. 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 January 1996, the Company refinanced a $1,600,000 bank term loan assumed in the acquisition of the Stockyards Hotel and is secured by a deed of trust on the hotel property. The note currently bears interest at the established prime rate; however, this rate can increase, subject to certain financial ratios, to a maximum of 1% above the prime rate. The note is payable in 59 installments of $13,350 plus accrued interest, with the balance due on January 19, 2001. In March 1996, one of the Company's subsidiaries entered into an 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 June 30, 1996, and 9 is secured by the accounts receivable and inventory of the subsidiary. The loan provides for interest to be paid monthly at a floating rate equal to the established prime rate. In March 1996, the Company borrowed $1,200,000 from an insurance company. The note is secured by a deed of trust on a commercial office building located in Fort Worth, Texas. The note bears interest at 7.75%, payable in 119 monthly installments of $9,852 with a final payment of $830,616.53 due April 1, 2006. Note I ------ Effective January 1, 1996, the Company entered into an agreement to purchase the assets of Cabo Tacobar One, Ltd. (Cabo), a Mexican restaurant concept with Central and South American influences located in Houston, Texas, for $589,000 in cash and 375,000 shares of the Company's common stock. Cabo currently has one restaurant operating and another location under lease. Additionally, the Company entered into an agreement to purchase the assets and assume certain liabilities related to the Stockyards Hotel, located in Fort Worth, Texas, for $500,000 in cash, 450,000 shares of the Company's common stock and the refinancing of a $1,600,000 bank term loan. Under this agreement, the Company has guaranteed, for a limited period of time, a sales price of $2.05 per share for any of the Company's stock that may be sold. 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. Excess of purchase price over fair value of net tangible assets acquired approximates $1,200,000 and is recorded as Goodwill. Unaudited pro forma results from continuing operations, as if the acquisitions had occurred at the beginning of each respective period, are as follows:
Nine Months Ended June 30, --------------------------------- 1996 1995 --------------- ---------------- (In thousands, except per share amounts) Revenues............................... $18,976 $15,589 Net income from continuing operations.. 907 658 Income per average common share........ .14 .11
10 BUFFTON CORPORATION PART I - FINANCIAL INFORMATION - ------------------------------ Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL INFORMATION At June 30, 1996, the Company consists of operations in two principal segments, electronic products and hospitality group. During the year ended September 30, 1995 and the nine months ended June 30, 1996, the Company entered into the following acquisition and disposition transactions. By approval of the Company's Board of Directors in December 1994, in a transaction effective January 1, 1995, the Company sold the operation of Flo Control Inc., headquartered in Burbank, California. See Note E of Notes to Consolidated Condensed Financial Statements for details of the sale. 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 I of Notes to Consolidated Condensed Financial Statements for details of the acquisitions. RESULTS OF OPERATIONS Consolidated net revenues in the 1996 three and nine month periods increased 36% and 28%, respectively, compared to 1995. Electronic products revenues for the 1996 three and nine month periods increased 24% and 27%, respectively, due to shipments made under the terms of a contract obtained in late fiscal 1995 for its DBCS line. Shipment terms under this contract continue through July 1997. Hospitality Division revenues for the 1996 three and nine month periods increased 73% and 34%, respectively, due to the inclusion of the results of operations of Cabo and SYH effective January 1, 1996. Consolidated total costs and expenses during the 1996 three and nine month periods increased 36% and 28%, respectively, compared to 1995. Consolidated costs of sales increased 37% and 28% during the 1996 three and nine month periods versus 1995. As a percent of related 11 revenue, these costs were 34% during the 1996 three and nine month periods versus 31% a year earlier. Electronic products cost of sales during the 1996 three and nine month periods increased 56% and 56%, respectively, compared to 1995. These costs as a percent of revenue were 41% in the 1996 three month period compared to 33% in 1995 and 42% in the 1996 six month period compared to 34% in 1995. The increase in absolute dollars was due to increased sales and the increase in costs as a percent of revenue is due to a greater percentage of sales of the DBCS line in 1996, which have a lower gross margin than the power siftor line. Cost of sales related to the Hospitality Division during the 1996 three and nine month periods increased 39% and 16%, respectively. 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 for the 1996 three and nine month periods increased 27% and 18%, respectively, compared to 1995. The absolute dollar increase in these expenses is due to increased sales levels incurred during 1996. As a percent of revenue, these expenses were 53% for the 1996 three month period versus 56% in 1995 and were 52% for the 1996 nine month period versus 57% in 1995. Electronic products selling, general and administrative expenses for the 1996 three and nine month periods approximated the 1995 amounts. The expenses associated with the Hospitality Division for the 1996 three and nine month periods increased 80% and 46%, respectively, compared to 1995. This increase is due to the inclusion of the results of operations of Cabo and SYH effective January 1, 1996. The increase in interest expense to $77,000 for the 1996 three month period from $27,000 in 1995 and to $172,000 for the 1996 nine month period from $99,000 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 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 June 30, 1996, the Company reported income from continuing operations before income taxes of $542,000 versus $395,000 in 1995. During the nine months ended June 30, 1996, the Company reported income from continuing operations before income taxes of $1,273,000 versus $945,000 in 1995. These increases are due to the Company's electronic products operation reporting higher profit in 1996 compared to 1995 and are attributable to higher sales levels. 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 required 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 12 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 nine months ended June 30, 1996, and the year ended September 30, 1995, $229,000 and $430,000, respectively, were incurred for work related to the engineering design. These costs are 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. Based on this work performed for the treatment plant, 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 the additional testing 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. Since this meeting, 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 will be reviewed. The revised remedy eliminates certain requirements of the existing ROD and significantly reduces the time period for remediation. Initial estimates of the revised remedy indicate capital costs of approximately $800,000 to $900,000, and ongoing maintenance costs of approximately $200,000 to $250,000 in the aggregate. The capital 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 capital cost completion. 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 possibly more attractive and cost efficient remedy is being discussed with the EPA. The EPA now estimates that a revised ROD can be issued by the end of calendar 1996. 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 and 375,000 shares of the Company's common stock. At the purchase date, the Cabo restaurant had 1,300 square feet with 58 seats but has been expanded to 3,000 square feet with 120 seats. Cabo is located in a strip center and is open seven days a week for lunch and dinner. The check average is $11.50. Additionally, the Company 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 and the refinancing of a $1,600,000 bank term loan. Under this 13 agreement, the Company has guaranteed, for a limited period of time, a sales price of $2.05 per share for any of this stock that may be sold. At June 30, 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. Excess of purchase price over fair value of net tangible assets acquired approximates $1,200,000 and is recorded as Goodwill. The Company currently plans to open a second Cabo unit in downtown Houston in late 1996 and to develop a destination food and beverage operation at SYH. In March 1996, one of the Company's subsidiaries entered into an 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 June 30, 1996, and is secured by the accounts receivable and inventory of the subsidiary. The loan provides for interest to be paid monthly at a floating rate equal to the established prime rate. In March 1996, the Company borrowed $1,200,000 from an insurance company. The note is secured by a deed of trust on a commercial office building located in Fort Worth, Texas. The note bears interest at 7.75%, payable in 119 monthly installments of $9,852 with a final payment of $830,616.53 due April 1, 2006. The note proceeds will be used for expansion of Cabo and SYH. Effective July 1, 1996, the Company sold one of its entertainment facilities located in New Orleans, Louisiana. The proceeds of $464,000, consisting of cash and a note receivable, approximated the net book value of the assets that were sold. 14 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 15 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 August 13, 1996 By: /s/ Robert Korman --------------------------- Vice President and Chief Financial Officer August 13, 1996 16 EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 131 0 3,671 (98) 1,732 5,983 9,056 (2,446) 22,592 2,642 0 0 0 336 17,074 22,592 18,178 18,178 6,231 16,733 0 0 172 1,273 409 864 0 0 0 864 0.05 0.00
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