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 MARCH 31, 2004, 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 May 14, 2004.
Class Outstanding at March 31, 2004
______ _______________________________
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 MARCH 31, 2004 and JUNE 30, 2003
ASSETS
March 31, June 30,
2004 2003
(Unaudited) (a)
Current Assets:
Cash $ 156,771 $ 1,161,986
Accounts and notes receivable 175,340 139,442
Inventories 4,417 4,483
Prepaid expenses 57,031 43,030
Notes receivable 30,000 30,000
Total current assets 423,559 1,378,941
Property, Plant and Equipment:
Land 820,553 820,553
Building and improvements 6,005,920 6,005,920
Furniture and equipment 1,500,706 1,400,047
Construction in progress 1,168,998 211,870
Less accumulated
depreciation
and amortization 1,579,631 1,345,436
Property, plant and
equipment - net 7,916,546 7,092,954
Other Assets:
Other assets 291,161 363,740
Total other assets 291,161 363,740
Total Assets $ 8,631,266 $ 8,835,635
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT MARCH 31, 2004 and JUNE 30, 2003
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
2004 2003
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 177,730 $ 163,427
Accrued liabilities 58,523 120,958
Taxes other than Federal
income taxes 194,629 192,571
Current portion of long-term
debt 153,290 153,290
Total current liabilities 584,172 630,246
Long-Term Liabilities:
Notes and mortgages payable 6,331,885 6,453,549
Total liabilities 6,916,057 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) (68,038) (32,744)
Treasury stock, at cost (89,921
and 87,246 Shares) (40,825) (39,488)
Total stockholders' equity 1,715,209 1,751,840
Total Liabilities and
Stockholders' Equity $ 8,631,266 $ 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 nine months ended March 31, 2004 and 2003
Three Months Ended Nine Months Ended
2004 2003 2004 2003
Revenues:
Rooms $ 687,381 $ 770,142 $ 2,125,456 $ 2,225,810
Food and beverage 18,679 17,718 55,223 60,628
Telephone 6,570 3,628 13,412 13,765
Rents 11,853 6,024 19,882 14,025
Other 8,000 8,911 18,000 21,885
Total revenues 732,483 806,423 2,231,973 2,336,113
Costs and Expenses:
Operating Departments:
Cost of sales 33,841 31,993 93,430 96,147
Salaries and wages 172,213 205,713 536,876 594,993
Other 60,583 48,957 185,410 177,636
General and Administrative 95,893 81,521 250,032 214,277
Advertising 56,119 61,828 170,048 183,563
Utilities 38,093 42,240 102,376 106,518
Repairs and Maintenance 18,961 25,219 52,368 63,193
Interest 134,334 135,208 405,457 411,013
Taxes and licenses 65,989 62,479 187,636 189,733
Insurance 16,800 8,155 50,400 25,719
Depreciation and Amortization 78,065 68,927 234,195 207,944
Total costs and expenses 770,891 772,240 2,268,228 2,270,736
Operating income (loss) (38,408) 34,183 (36,255) 65,377
Interest income - (26) 961 30
Income from continuing operations (38,408) 34,157 (35,294) 65,407
Discontinued operations
Income from operations of the
discontinued component, including
gain on disposal of $363,963-3mo;
$379,321-9 mo for 2003 - 352,235 - 353,523
Net Income (Loss) before
Income Taxes (38,408) 386,392 (35,294) 418,930
Income Taxes - - - -
Net Income (Loss) $ (38,408) $ 386,392 $(35,294) $ 418,930
Earnings (Loss) per Share $ (.03) $ .25 $( .02) $ .27
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 STATEMENT OF CASH FLOWS
(UNAUDITED)
For the nine months ended March 31, 2004 and 2003
2004 2003
<s> <c> <c>
Cash Flows From Operating Activities:
Net income (loss) $ (35,294) $ 418,930
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 234,195 231,568
Gain on sale of asset - (379,321)
(Increase) decrease in other assets 72,579 8,991
(Increase) decrease in current assets:
Accounts receivable (35,898) (177,387)
Inventories 66 423
Prepaid expenses (14,001) (955)
Increase (decrease) in current
liabilities:
Accounts payable 14,303 15,245
Accrued liabilities (62,435) (85,219)
Taxes other than Federal income tax 2,058 (158,236)
Total adjustments 210,867 (544,891)
Net Cash Provided by (Used in)
Operating Activities 175,573 (125,961)
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the nine months ended March 31, 2004 and 2003
2004 2003
<s> <c> <c>
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ - $ 3,044,147
Capital Expenditures (1,057,787) (531,033)
Net cash provided by (used in)
investing activities (1,057,787) 2,513,114
Cash Flows From Financing Activities:
Purchase of Treasury Stock (1,337) -
Payment on notes and mortgages (121,664) (2,150,092)
Net cash used in
financing activities (123,001) (2,150,092)
Net Increase (Decrease) in Cash
and Cash Equivalents (1,005,215) 237,061
Cash and Cash Equivalents at Beginning of Year 1,161,986 803,660
Cash and Cash Equivalents at End of Period $ 156,771 $ 1,040,721
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 405,457 $ 438,380
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
March 31, 2004
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
March 31, 2004
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 MARCH 31, 2004 AND 2003
The Holiday Inn Hotel and Suites room revenues decreased 10.7% in the
three months ended March 31, 2004 relative to the comparable period in
2003. The Holiday Inn Hotel and Suites' average occupancy percentage for
the three months ended March 31, 2004 was 70.42%, a decrease of 7.98%
relative to the comparable period in 2003. Management faults the nearby
construction work and the decline in group business for the loss of
income. Food and beverage revenues increased 5.4% in the quarter ended
March 31, 2004 relative to the comparable period in 2003. Management
credits increased weekend group business for the small improvement in food
and beverage revenue.
Total cost and expenses have decreased a very modest .2%. The 17.6%
increase in general and administrative expenses is due in large part to
the increased legal fees related to the going private transaction,
discussed later in the Liquidity section of this Form 10Q. Salaries and
wages expense have decreased 16.3%, 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.
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RESULTS OF OPERATION, CON'T.
NINE MONTHS ENDED MARCH 31, 2004 AND 2003
Room revenues have decreased by 4.5% in the nine months ended March
31, 2004 relative to the comparable period in 2003. Food and Beverage
revenues have decreased by 8.9% in the nine months ended March 31, 2004
relative to the comparable period in 2003. This decrease is largely due
to the complimentary meals provided to hotel guests as an incentive to
stay at the property.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity, as measured by current assets divided by current
liabilities, has decreased from 2.19 at June 30, 2003 to .73 at March 31,
2004.
Liquidity has decreased significantly for this time period due to
the cash purchase of land in Barboursville, WV for the site of a new
Holiday Inn property (discussed in the following paragraph). 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 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 the land
needed for the new construction. The Company paid $808,000 for the land
on February 25, 2004. 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.
During the last 40 years, the company has routinely bought and sold
property and has built three hotels. At the end of April and while on a
trip to Honduras, Mr. Midkiff spotted a dive resort for sale and took the
opportunity to begin negotiations for the purchase of the resort.
Uptowner has placed a refundable $110,000 deposit toward the $2,600,000
purchase price while it decides whether to purchase the resort. The board
of directors approved the transaction on May 12, 2004, and Uptowner hopes
to close the transaction by June 15, 2004.
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LIQUIDITY AND CAPITAL RESOURCES, CON'T.
A downpayment of $850,000 will be paid with the balance being seller
financed at an interest rate of 71/2% and amortized over 20 years. Uptowner
will mortgage the Barboursville property to finance the downpayment, and
Mr. Midkiff will personally guarantee the loan for the downpayment and the
seller financed portion of the transaction.
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 25,000 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 4 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
$822,447. The company has not yet obtained financing for this project.
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 March 31, 2004.
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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
May 13, 2004
By /s/ David Robinson,
CFO and Treasurer
May 13, 2004
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