SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 2003, COMMISSION FILE NUMBER 0-1957
UPTOWNER INNS, INC.
(Exact Name of Registrant as Specified in its Charter)
West Virginia 55-0457171
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
741 5th Avenue, Huntington, West Virginia 25701
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (304) 525-8162
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.
X Yes No
_______ _______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
_______ _______
Indicate the number of Shares outstanding of each of the Issuer's classes
of Common Stock, as of the close of January 16, 2003.
Class Outstanding at December 31, 2003
______ _______________________________
Common Stock - $.50 par value 1,493,642 shares
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 2003 and JUNE 30, 2003
ASSETS
December 31, June 30,
2003 2003
(Unaudited) (a)
Current Assets:
Cash $ 1,019,812 $ 1,161,986
Accounts and notes receivable 155,050 139,442
Inventories 4,710 4,483
Prepaid expenses 49,900 43,030
Notes receivable 30,000 30,000
Total current assets 1,259,472 1,378,941
Property, Plant and Equipment:
Land 820,553 820,553
Building and improvements 6,005,920 6,005,920
Furniture and equipment 1,471,045 1,400,047
Construction in progress 281,137 211,870
Less accumulated
depreciation
and amortization 1,501,566 1,345,436
Property, plant and
equipment - net 7,077,089 7,092,954
Other Assets:
Other assets 295,480 363,740
Total other assets 295,480 363,740
Total Assets $ 8,632,041 $ 8,835,635
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 2003 and JUNE 30, 2003
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
2003 2003
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 137,731 $ 163,427
Accrued liabilities 50,094 120,958
Taxes other than Federal
income taxes 164,033 192,571
Current portion of long-term
debt 153,290 153,290
Total current liabilities 505,148 630,246
Long-Term Liabilities:
Notes and mortgages payable 6,373,275 6,453,549
Total liabilities 6,878,423 7,083,795
Stockholders' Equity:
Common stock - par value
$.50 per share; authorized
5,000,000 shares; issued
1,583,563 shares 791,782 791,782
Additional paid-in capital 1,032,290 1,032,290
Retained earnings (deficit) (29,629) (32,744)
Treasury stock, at cost (89,921
and 87,246 Shares) (40,825) (39,488)
Total stockholders' equity 1,753,618 1,751,840
Total Liabilities and
Stockholders' Equity $ 8,632,041 $ 8,835,635
(a) Financial information as of June 30, 2003 has been derived from the
audited, consolidated financial statements of the registrant.
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the periods of three and six months ended December 31, 2003 and 2002
Three Months Ended Six Months Ended
2003 2002 2003 2002
Revenues: * *
Rooms $ 680,517 $ 698,160 $ 1,438,075 $ 1,455,668
Food and beverage 18,931 21,370 36,544 42,911
Telephone 3,225 4,577 6,841 10,137
Rents 4,000 2,000 8,030 12,974
Other 4,071 7,088 10,000 8,000
Total revenues 710,744 733,195 1,499,490 1,529,690
Costs and Expenses:
Operating Departments:
Cost of sales 28,745 32,454 59,590 64,156
Salaries and wages 169,275 188,082 364,663 389,281
Other 58,892 66,066 124,827 128,679
General and Administrative 87,252 80,487 154,139 132,756
Advertising 52,998 56,759 113,929 121,735
Utilities 31,319 29,689 64,283 64,278
Repairs and Maintenance 16,045 17,250 33,406 37,974
Interest 135,174 144,750 271,123 275,805
Taxes and licenses 57,043 60,331 121,646 127,253
Insurance 16,800 8,655 33,600 17,564
Depreciation and Amortization 78,065 68,927 156,130 139,015
Total costs and expenses 731,608 753,450 1,497,336 1,498,496
Operating income (loss) (20,864) (20,255) 2,154 31,194
Interest income - - 961 56
Income from continuing operations (20,864) (20,255) 3,115 31,250
Discontinued operations
Income from operations of
the discontinued component - 1,039 - 1,288
Net Income before Income
Taxes (20,864) (19,216) 3,115 32,538
Income Taxes - - - -
Net Income $ (20,864) $(19,216) $ 3,115 $ 32,538
Earnings per Share $ (.01) $ (.01) $ .00 $ .02
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
* Financial information restated for effects of discontinued operations.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the six months ended December 31, 2003 and 2002
2003 2002
<s> <c> <c>
Cash Flows From Operating Activities:
Net income $ 3,115 $ 32,538
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 156,130 161,138
Gain on sale of asset - (15,359)
(Increase) decrease in other assets 68,259 17,589
(Increase) decrease in current assets:
Accounts receivable (15,608) (82,809)
Inventories (227) (128)
Prepaid expenses (6,870) 30,720
Increase (decrease) in current
liabilities:
Accounts payable (25,695) 121,005
Accrued liabilities (70,864) (61,524)
Taxes other than Federal income tax (28,538) (55,993)
Total adjustments 76,587 114,639
Net Cash Provided by (Used in)
Operating Activities 79,702 147,177
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the six months ended December 31, 2003 and 2002
2003 2002
<s> <c> <c>
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ - $ 1,930,072
Capital Expenditures (140,265) (197,774)
Net cash provided by (used in)
investing activities (140,265) 1,732,298
Cash Flows From Financing Activities:
Purchase of Treasury Stock (1,337) -
Payment on notes and mortgages (80,274) (1,709,421)
Net cash used in
financing activities (81,611) (1,709,421)
Net Increase in Cash
and Cash Equivalents (142,174) 170,054
Cash and Cash Equivalents at Beginning of Year 1,161,986 803,660
Cash and Cash Equivalents at End of Period $ 1,019,812 973,714
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 271,123 $ 249,133
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
1. BASIS OF PRESENTATION
The financial statements presented reflect Uptowner Inns, Inc. and its
consolidated subsidiary, Motel and Restaurant Supply.
The foregoing statements are unaudited; however, in the opinion of
management, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial statements 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. A summary of the Corporation's
significant accounting policies is set forth in Note 1 to the Consolidated
Financial Statements in the Corporation's Annual Report to shareholders
and Form 10-K for June 30, 2003.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
2. CONTINGENCY
None
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UPTOWNER INNS, INC. AND SUBSIDIARY
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters disclosed herein may be forward-looking
statements that involve risks and uncertainties, including the facilities
utilization, costs associated with maintaining the operations, liquidity
issues, and other risks. You can identify these statements by such
forward-looking words as "may," "will," "expect," "plan" and similar
words. Actual strategies and results in the future may differ materially
from those management currently expects. Forward-looking statements
represent management's judgment as of the current date. The Company
disclaims, however, any intent or obligation to update any forward-looking
statements contained in this Form 10-Q.
RESULTS OF OPERATION
THREE MONTHS ENDED DECEMBER 31, 2003 AND 2002
The Holiday Inn Hotel and Suites room revenues decreased 2.5% in the
three months ended December 31, 2003 relative to the comparable period in
2002. The Holiday Inn Hotel and Suites' average occupancy percentage for
the three months ended December 31, 2003 was 69.38%, a small decrease of
1.17% relative to the comparable period in 2002. Although this is a minor
decrease, management faults the nearby construction work for the loss of
income. The 11.4% decrease in food and beverage revenues in the quarter
ended December 31, 2003 relative to the comparable period in 2002, is
largely due to the complimentary meals provided to hotel guests as an
incentive to stay at the property.
Total cost and expenses have decreased a modest 2.9%. The 8.4%
increase in general and administrative expenses is due in large part to
the increased accounting and legal fees related to the going private
transaction, discussed later in the Liquidity section of this Form 10Q.
Salaries and wages expense have decreased 10%, showing that with the loss
of revenue, management has done a good job controlling labor cost. The
depreciation expense has increased due to the addition of fixed assets in
fiscal year ended June 30, 2003. Insurance expense also continues to
increase.
No provision for income tax expense for the three months ended
December 31, 2003 is reflected due to the large amount of net operating
loss carryforward ($ 994,955) to be applied to taxable income, which has
been provided for in previous periods and included in deferred tax assets.
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RESULTS OF OPERATION, CON'T.
SIX MONTHS ENDED DECEMBER 31, 2003 AND 2002
Room revenues have decreased slightly by 1.2% in the six months
ended December 31, 2003 relative to the comparable period in 2002. Food
and Beverage revenues have decreased by 14.8% in the six months ended
December 31, 2003 relative to the comparable period in 2002. These
differences, as well as the variances in expenses, are due to the
explanations above for the three month period ending December 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, as measured by current assets divided by current
liabilities, has increased from 2.19 at June 30, 2003 to 2.49 at December
31, 2003.
Although liquidity has increased for this time period, it is likely
that the Company's liquidity position will gradually decrease in the next
two to three years. Management estimates that business will fall
approximately 10% over this time period due to construction work near the
hotel. The construction work for the new Pullman Square project is going
on right next to the hotel, and has caused many guests to leave the
Holiday Inn property due to excessive early morning noise. Many guests
have also left due to the lack of parking that the construction work has
caused. The Company has already taken action to cut expenses to help make
up for the shortfall in business. Consideration is also being given to
adding a Director of Sales to assist the General Manager in bringing in
new business. The breakeven point for the hotel is 61% in occupancy
points and over and above the 61% occupancy is considered profit. In the
past, hotel occupancy has averaged 72-74%. With an occupancy decline of
10%, management hopes to hold the average occupancy levels at 60-63%.
With this projection, the profits will be eliminated and the hotel will
function at breakeven level or 1% or 2% higher.
There are also plans for the Company to add a new Holiday Inn
property in Barboursville, WV, but it will probably be another one to two
years before construction for that site begins. The Company has purchased
the franchise agreement from Holiday Inn, and has also purchased a portion
of the land needed for the new construction. The Company is planning to
finance the new hotel with a 15 year amortization at approximately 7.25%.
The projected start time for construction is July, 2005.
The Company obtained a valuation of the Company's common stock. The
purpose of the valuation was to provide the Company's management with
information to be used in a going private transaction whereby the Company
is seeking shareholder approval for a 10,000 for 1 reverse stock split and
providing a cash payment for fractional shares of common stock. The
transaction would have the effect of reducing the number of shareholders
from 1,392 to 8 and the Company would no longer file reports under the
Securities and Exchange Act of 1934. The Company expects the transaction
to occur in the spring of 2004, and approximates the transaction to cost
$731,497. The funds for this transaction will be obtained from working
capital.
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LIQUIDITY AND CAPITAL RESOURCES, CONT'D.
ITEM 4: CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the Company (including
its consolidated subsidiary) required to be included in the Company's
periodic SEC filings.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Currently, two lawsuits have been filed against Uptowner Inns, Inc.
involving the same claimed acts of negligence. On November 5, 2003, a
lawsuit was filed in the Circuit Court of Cabell County, West Virginia
styled McFarland v. Piepenbrink and Uptowner Inns, Inc., Civil Action
No.:03-C-0625; and, on January 14, 2004, a lawsuit was filed in the
Circuit Court of Cabell County, West Virginia, styled Jeter v. Piepenbrink
and Uptowner Inns, Inc., Civil Action No.:04-C-0039; In both cases the
Plaintiffs seek judgment for unspecified damages against each of the
Defendants compensating the Plaintiff for injuries and damages suffered
after falling from a deck located on property owned by Defendant
Piepenbrink. The lawsuit involves property which was conveyed to
Defendant Piepenbrink by Rez.com, Inc. in July, 2001. This property was
conveyed to Rez.com, Inc. by Uptowner Inns, Inc. in July, 1998. The
incident in question occurred on or about May 10, 2003, well after this
property was conveyed by the company to Rez.com, Inc., and accordingly,
the company believes that it has no liability to Plaintiff. As such, the
company intends to defend this litigation vigorously. Currently, the
company is in process of answering the complaints and conducting
preliminary discovery.
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
31.1 Certification pursuant to 18 U.S.C. Section 302 of the
Sarbanes-Oxley Act of 2002 for Carl E. Midkiff, Chief
Executive Officer.
31.2 Certification pursuant to 18 U.S.C. Section 302 of the
Sarbanes-Oxley Act of 2002 for David Robinson, Chief
Financial Officer.
32.1 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for Carl E. Midkiff, Chief Executive
Officer.
32.2 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for David Robinson, Chief Financial
Officer.
b. The Company was not required to file Form 8-K for the quarter
ended December 31, 2003.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) UPTOWNER INNS, INC.
By /s/ Carl E. Midkiff,
CEO and Secretary
February 16, 2004
By /s/ David Robinson,
CFO and Treasurer
February 16, 2004
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