UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000.
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: 33-78866
----------------------
MOA HOSPITALITY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0166914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
----------------------
701 Lee Street, Suite 1000
Des Plaines, Illinois 60016
(847) 803-1200
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
----------------------
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
Number of shares of Common Stock, $.01 par value outstanding as of
December 20, 2000: 800,000
INDEX TO FORM 10-Q
Page
Part I Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - 2
June 30, 2000 (unaudited) and December 31, 1999.
Condensed consolidated statements of operations - 3
Three months ended June 30, 2000 and 1999 and
Six months ended June 30, 2000 and 1999 (unaudited).
Condensed consolidated statements of cash flows - 4
Six months ended June 30, 2000 and 1999 (unaudited).
Notes to condensed consolidated financial statements - 5
June 30, 2000 (unaudited).
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
General 8
Results of Operations 9
Liquidity and Capital Resources 15
Part II Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
2000 1999
----------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 7,650 $ 4,422
Accounts receivable from property operations 1,654 1,814
Operating supplies and prepaid expenses 2,135 1,968
Current portion of mortgage and notes receivable 666 1,608
----------- ------------
Total Current Assets 12,105 9,812
Investment property:
Operating properties,
net of accumulated depreciation 241,448 256,609
Land held for development 4,448 4,938
----------- ------------
Total investment property 245,896 261,547
Other Assets:
Deposits and other assets 13,362 5,532
Mortgage and other notes receivable,
less current portion 29,158 23,448
Financing and other deferred costs, net of
accumulated amortization of $12,256 in 2000
and $9,104 in 1999 13,166 12,866
----------- ------------
Total Other Assets 55,686 41,846
----------- ------------
Total Assets $ 313,687 $ 313,205
=========== ============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,929 $ 1,714
Real estate taxes payable 1,983 2,018
Accrued interest payable 3,683 2,713
Other accounts payable and accrued expenses 7,663 10,194
Other liabilities - tenant sites 22,088 11,501
Current portion of long-term debt 29,800 13,154
----------- ------------
Total Current Liabilities 67,146 41,294
Net deferred tax liabilty 2,561 105
Long-term debt, less current portion:
Mortgage and other notes payable 195,130 211,525
12% Senior Subordinated Notes, net of unamortized
discount of $976 in 2000 and $1,401 in 1999 33,429 43,501
----------- ------------
Total Long-term debt, excluding current portion 228,559 255,026
----------- ------------
Total Liabilities 298,266 296,425
----------- ------------
Minority Interests 1,685 1,709
Stockholders' equity:
Common stock, $.01 par value, 1,500,000
shares authorized; 800,000 shares issued
and outstanding 8 8
Additional paid-in capital 15,294 15,294
Retained earnings (1,566) (231)
----------- ------------
Total Stockholders' Equity 13,736 15,071
----------- ------------
Total Liabilities and Stockholders' Equity $ 313,687 $ 313,205
=========== ============
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- ---------------------------
2000 1999 2000 1999
---------- ----------- ----------- -----------
Revenues:
Motel operating revenues $ 15,325 $ 26,740 $ 29,984 $ 47,716
Lease revenues 2,618 401 4,512 630
Vending revenues 257 263 480 447
Other revenues 798 681 1,469 1,025
---------- ----------- ----------- -----------
Total revenues 18,998 28,085 36,445 49,818
Costs and expenses:
Motel operating expenses 8,105 14,647 17,771 28,024
Marketing and royalty fees 1,137 1,799 2,192 3,234
General and administrative 1,472 3,615 2,846 6,258
Lease expenses 75 13 195 16
Vending expenses 233 166 423 308
Depreciation and amortization 3,523 3,606 7,159 7,218
---------- ----------- ----------- -----------
Total direct expenses 14,545 23,846 30,586 45,058
---------- ----------- ----------- -----------
Net operating income 4,453 4,239 5,859 4,760
Interest expense 6,318 7,397 12,845 14,703
---------- ----------- ----------- -----------
Loss from operations (1,865) (3,158) (6,986) (9,943)
Minority interests 3 (18) 24 (5)
Gain on sale of properties 693 1,278 1,084 1,652
---------- ----------- ----------- -----------
Loss before income taxes
and extraordinary item (1,169) (1,898) (5,878) (8,296)
Income tax benefit (455) (657) (2,288) (3,147)
---------- ----------- ----------- -----------
Loss before extraordinary item (714) (1,241) (3,590) (5,149)
Gain on early extinguishment of debt, net of
applicable income taxes of $1,437 - - 2,255 -
---------- ----------- ----------- -----------
Net loss $ (714) $ (1,241) $ (1,335) $ (5,149)
========== =========== =========== ===========
Loss per common share:
Loss before extraordinary item $ (0.89) $ (1.55) $ (4.49) $ (6.44)
Extraordinary item - - 2.82 -
---------- ----------- ----------- -----------
Net loss per common share (basic and diluted) $ (0.89) $ (1.55) $ (1.67) $ (6.44)
========== =========== =========== ===========
Weighted average number of
common shares outstanding 800,000 800,000 800,000 800,000
========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
June 30
-----------------------
2000 1999
---------- ----------
Cash flows used in operating activities:
Net loss $ (1,335) $ (5,149)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation, amortization and accretion of
discount on notes 7,227 7,411
Minority interests of others in net loss
from operations (24) 5
Deferred income taxes 2,456 1,121
Gain on early extinguishment of debt (3,692) -
Gain on sale of properties (1,084) (1,652)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 159 (772)
Operating supplies, prepaid expenses,
deposits and other assets (8,547) (12,056)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,858 (17)
Accrued interest payable 970 17
---------- ----------
Net cash used in operating activities (2,012) (11,092)
Cash flows provided by (used in) investing activities:
Acquisition and development of investment properties (1,096) (4,303)
Refurbishment of investment properties (2,706) (4,054)
Net proceeds from sale of investment properties 7,241 6,397
Cash restricted for refurbishment of properties (544) 1,456
Collections on mortgage and other notes receivable 2,858 277
---------- ----------
Net cash provided by (used in) investing activities 5,753 (227)
Cash flows provided by (used in) financing activities:
Proceeds from notes payable 11,979 37,948
Repayment of notes payable (11,728) (35,398)
Distributions to minority interests - -
Deferred financing costs (764) (1,623)
---------- ----------
Net cash provided by (used in) financing activities (513) 927
---------- ----------
Net increase (decrease) in cash and cash equivalents 3,228 (10,392)
Cash and cash equivalents at beginning of period 4,422 19,582
---------- ----------
Cash and cash equivalents at end of period $ 7,650 $ 9,190
========== ==========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 11,768 $ 14,483
========== ==========
Cash paid (net of refunds received) during the
period for income taxes $ 159 $ 656
========== ==========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in MOA Hospitality, Inc. and Subsidiaries' Annual Report on
Form 10-K for the year ended December 31, 1999. The terms "MOA" and the
"Company" mean MOA Hospitality, Inc. and its subsidiaries. Certain
reclassifications of prior-period amounts have been made to conform with
current-period presentation, which have not changed operations or stockholders'
equity.
2. Divestitures and Leasing Activities
In January through June 2000, the Company leased twenty-six of its
operating properties to third party operators under terms similar to previous
operating leases executed by the Company.
In January through June 2000, the Company sold six of its lodging
facilities for approximately $14.5 million consisting of $8.0 million of cash
and $6.5 million in notes receivable. Four properties were sold for a gain of $1
million. The other two properties were sold at a loss in the amount of
$1,156,000 that was previously recorded at December 31, 1999 as part of the
impairment loss provision. The company also sold a vacant parcel of land for its
carrying value.
In July through November 30, 2000, the Company leased an additional
eight of its lodging facilities to third party operators under terms similar to
previous operating leases executed by the Company.
In July through November 30, 2000, the Company sold one of its lodging
facilities for cash of approximately $4.0 million and a gain of approximately
$0.7 million.
3. Mortgage and Other Notes Payable
In January 2000, the Company borrowed $1.7 million at prime
plus .5% with monthly principal payments of $212,500 due October 1, 2000.
In February 2000, the Company issued a promissory note in the
amount of $460,000 for a parcel of land in Cody, WY bearing no interest and due
July 15, 2000.
In March 2000, the Company repurchased an additional $10.5
million of the 12% Senior Subordinated Notes from an affiliate for a pre-tax
gain of $3.7 million. As part of the transaction the Company assumed a $4.4
million margin account loan with an annual interest rate of 9% and recorded a
$1.4 million adjustment to income taxes payable to the parent.
In April 2000, the Company borrowed $2,100,000 at 9.25% with
monthly principal and interest payments of $19,408 due in seven years, secured
by one property in Merrimack, New Hampshire.
In May 2000, the Company borrowed $3,300,000 at 10.5% for four
years with monthly principal and interest payments of $84,491.
4. Income Taxes
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate of 34% to income before income taxes principally as
a result of state income taxes.
5. Contingencies
The Company is involved in various other legal proceedings
arising in the ordinary course of business. The Company does not believe that
any of these actions, either individually or in the aggregate, will have a
material adverse effect on the Company's business, results of operations or
financial condition.
The Company remains contingently liable on a $2.3 million note
arising from a sale of a motel in 1997 in a transaction where the purchaser
assumed an existing mortgage loan secured by the property.
6. Segments
As of June 30, 2000 the Company, directly and through
subsidiaries, owned 120 lodging facilities in 39 states. The Company owns a 100%
interest in all but two of its properties. The Company operates fifty-one of its
motels and leases sixty-nine of its motels to third party tenants pursuant to
operating leases. The Company separately evaluates the performance of each of
its motels.
Three months ended Six months ended
June 30 June 30
----------------------- --------------------------
2000 1999 2000 1999
--------- ---------- ---------- ----------
Motel operations:
Motel operating revenue:
Room revenues $ 14,315 $ 25,283 $ 27,900 $ 45,029
Ancillary motel revenues 1,010 1,457 2,084 2,687
--------- ---------- ---------- ----------
Total motel operating revenues 15,325 26,740 29,984 47,716
Motel costs and expenses:
Motel operating expenses 8,105 14,647 17,771 28,024
Marketing and royalty fees 1,137 1,799 2,192 3,234
Depreciation and amortization 1,981 3,073 4,323 6,301
--------- ---------- ---------- ----------
Total motel direct expenses 11,223 19,519 24,286 37,559
--------- ---------- ---------- ----------
4,102 7,221 5,698 10,157
Lease Operations
Lease revenues 2,618 401 4,512 630
Lease expenses 75 13 195 16
Depreciation and amortization 1,312 253 2,376 438
--------- ---------- ---------- ----------
1,231 135 1,941 176
Vending Operations
Vending revenues 257 263 480 447
Vending expenses 233 166 423 308
Depreciation and amortization 49 132 96 184
--------- ---------- ---------- ----------
(25) (35) (39) (45)
Corporate Operations
Other revenues 798 681 1,469 1,025
General and administrative expenses:
Management Company Operations 1,159 3,178 2,260 5,575
Construction/Acquisition and Divestiture 224 320 379 440
Vending - general and administrative 89 117 207 243
--------- ---------- ---------- ----------
Total general and administrative expenses 1,472 3,615 2,846 6,258
Depreciation and amortization 181 148 364 295
--------- ---------- ---------- ----------
(855) (3,082) (1,741) (5,528)
--------- ---------- ---------- ----------
Net operating income 4,453 4,239 5,859 4,760
Interest expense 6,318 7,397 12,845 14,703
--------- ---------- ---------- ----------
Loss from operations (1,865) (3,158) (6,986) (9,943)
Minority interests 3 (18) 24 (5)
Gain on sale of properties 693 1,278 1,084 1,652
--------- ---------- ---------- ----------
Loss before income taxes
And extraordinary item (1,169) (1,898) (5,878) (8,296)
Income tax benefit (455) (657) (2,288) (3,147)
--------- ---------- ---------- ----------
Loss before extraordinary item (714) (1,241) (3,590) (5,149)
Gain on early extinguishment of debt - - 2,255 -
--------- ---------- ---------- ----------
Net Loss $ (714) $ (1,241) $ (1,335) $ (5,149)
========= ========== ========== ==========
Total Assets:
Motel Operations $ 161,416 $ 266,721
Lease Operations 108,162 22,691
Corporate and other 44,109 52,603
---------- ----------
$ 313,687 $ 342,015
========== ==========
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND AS SUCH, SPEAK ONLY AS OF THE DATE MADE. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: THE COMPANY'S ABILITY TO OBTAIN FINANCING,
COMPETITION, INTEREST RATE FLUCTUATIONS, OR GENERAL BUSINESS AND ECONOMIC
CONDITIONS.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM CONDENSED
CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES
THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL OPERATING RESULTS
PRESENTED BELOW FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 HAVE
BEEN PREPARED ON THE SAME BASIS AS THE INTERIM CONDENSED CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS AND, IN THE OPINION OF THE COMPANY, INCLUDE ALL ADJUSTMENTS
(CONSISTING ONLY OF NORMAL RECURRING ADJUSTMENTS) NECESSARY TO PRESENT FAIRLY
THE INFORMATION SET FORTH THEREIN.
General
MOA operates principally in the economy limited service segment of the
lodging industry. As a result, its average room rates tend to be lower than the
average room rates of full service lodging facilities. However, due to the
limited nature of the public space and ancillary services provided by limited
service motels, the Company's expenses tend to be lower than those of full
service lodging facilities. The profitability of the lodging industry in general
is significantly dependent upon room rental rates and occupancy rates. Due to
the fixed nature of a relatively high portion of the Company's expenses, changes
in either room rates or occupancy rates result in significant changes in the
operating profit of the Company's motels.
Three Months Ended June 30, 2000 Compared to the Three Months Ended
June 30, 1999
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
condensed consolidated financial statements presented elsewhere herein. (certain
of the 1999 numbers have been reclassified to conform to the 2000 presentation):
Supplemental Operating Results and Statistics
------------------------------------------------------------
(unaudited)
Three Months Ended June 30
------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
------------------ ------------------ --------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- --------- ---------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $13,439 $13,248 $ 876 $12,035 $ 14,315 $ 25,283
Ancillary motel revenues 962 867 48 590 1,010 1,457
-------- -------- -------- -------- --------- ---------
Total motel operating revenues 14,401 14,115 924 12,625 15,325 26,740
Motel costs and expenses:
Motel operating expenses 7,053 6,791 1,052 7,856 8,105 14,647
Marketing and royalty fees 1,045 932 92 867 1,137 1,799
Depreciation and amortization 1,506 1,422 475 1,651 1,981 3,073
-------- -------- -------- -------- --------- ---------
Total motel direct expenses 9,604 9,145 1,619 10,374 11,223 19,519
-------- -------- -------- -------- --------- ---------
$ 4,797 $ 4,970 $ (695) $ 2,251 4,102 7,221
======== ======== ======== ========
Lease operations:
Lease revenues 2,618 401
Lease expenses 75 13
Depreciation and amortization 1,312 253
--------- ---------
1,231 135
Vending operations:
Vending revenues 257 263
Vending expenses 233 166
Depreciation and amortization 49 132
--------- ---------
(25) (35)
Corporate operations:
Other revenues, net 798 681
General and administrative expenses:
Management Company Operations 1,159 3,178
Construction/Acquisition
and Divestiture 224 320
Vending general and administrative 89 117
--------- ---------
Total general and administrative expenses 1,472 3,615
Depreciation and amortization 181 148
--------- ---------
(855) (3,082)
--------- ---------
Net operating income $ 4,453 $ 4,239
========= =========
Other data:
Number of motels at period end (5) 50 50 1 67 51 117
Number of rooms at period end (5) 4,421 4,424 70 4,811 4,491 9,235
Occupancy percentage (5) 68.99% 70.82% 75.26% 68.89% 69.08% 68.53%
ADR (1) (5) $ 48.41 $ 46.43 $ 48.04 $ 38.52 $ 48.40 $ 42.85
REVPAR (2) (5) $ 35.79 $ 35.04 $ 37.26 $ 27.84 $ 35.81 $ 31.06
Net operating income margin (3) 23.44% 15.09%
Net motel revenue margin (4) (5) 46.90% 50.59% 43.39% 32.42% 42.49% 40.72%
- -----------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total number
of rooms available.
(3) Net operating income margin represents net operating income divided by
total motel operating revenues plus lease revenues plus vending revenues
plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At June 30, 2000 and for the three months then ended, excludes amounts
related to the sixty-nine motels which are leased to third party tenants.
Total revenues consist principally of motel operating revenues. Motel
operating revenues are derived from room rentals and ancillary motel revenues
such as charges to guests for food and beverage service, long distance telephone
calls, and fax machine use. Lease revenues are derived from properties leased to
third parties. Vending revenues are derived from vending machines used in the
motels and also vending machines placed in non owned locations. Other revenues
include interest income, and other miscellaneous income. Total revenues
decreased to $18,998,000 for the three months ended June 30, 2000 from
$28,085,000 for the three months ended June 30, 1999, a decrease of $9,087,000
or 32.4% primarily as a result of the leasing activity of the Company. As lessor
of 69 motels at June 30, 2000 the Company records rental income and does not
reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $15,325,000 for the three months ended June
30, 2000 from $26,740,000 for the three months ended June 30, 1999, a decrease
of $11,415,000 or 42.7%. The motel revenues for motels owned during both periods
increased approximately $286,000 which was offset by a decrease of $11,701,000
in motel revenues for motels acquired and divested since April 1, 1999. Motel
revenues for motels owned during both periods increased 2.0%. The increase in
motel revenues for motels owned during both periods was attributable principally
to an increase in the average daily rate ("ADR"). The ADR for the motels owned
during both periods increased to $48.41 for the three months ended June 30, 2000
from $46.43 for the three months ended June 30, 1999, an increase of $1.98 or
4.3%. Revenue per available room ("REVPAR") for motels owned during both periods
increased to $35.79 for the three months ended June 30, 2000 from $35.04 for the
three months ended June 30, 1999, an increase of $0.75 or 2.1%. The acquired and
divested motels had an occupancy percentage of 75.26%, an ADR of $48.04 and
REVPAR of $37.26 for the three months ended June 30, 2000.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, insurance, linens and other operating
supplies. Motel operating expenses decreased to $8,105,000 for the three months
ended June 30, 2000 from $14,647,000 for the three months ended June 30, 1999, a
net decrease of $6,542,000 or 44.7%. Motel operating expenses for motels
acquired and divested since April 1, 1999 decreased to $1,052,000 for the three
months ended June 30, 2000 from $7,856,000 for the three months ended June 30,
1999, a decrease of $6,804,000 or 86.6%. The decrease was partially offset by an
increase of $262,000 or 3.9% in the costs of operating the motels owned during
both periods. The cost of operating motels owned during both periods increased
to $7,053,000 for the three months ended June 30, 2000 from $6,791,000 for the
three months ended June 30, 1999. The increase in operating costs is principally
due to increased labor and related costs and an increase in repairs and
maintenance expenditures. Motel operating expenses as a percentage of motel
revenues decreased to 52.9% for the three months ended June 30, 2000 from 54.8%
for the three months ended June 30, 1999. Motel operating expenses as a
percentage of motel revenues for the motels owned in both periods increased to
49.0% for the three months ended June 30, 2000 from 48.1% for the three months
ended June 30, 1999.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to franchisors
and other related marketing expenses. Marketing and royalty fees decreased to
$1,137,000 for the three months ended June 30, 2000 from $1,799,000 for the
three months ended June 30, 1999, a decrease of $662,000 or 36.8%. The marketing
and royalty fees for motels owned during both periods increased to $1,045,000
for the three months ended June 30, 2000 from $932,000 for the three months
ended June 30, 1999, an increase of $113,000 or 12.1%. For the motels owned
during both periods, marketing and royalty fees as a percentage of room revenues
increased to 7.8% for the three months ended June 30, 2000 from 7.0% for the
three months ended June 30, 1999. The increase in marketing and royalty fees for
motels owned in both periods are principally due additional marketing efforts to
maintain or increase the occupancy percentage.
Lease operations increased to $1,231,000 for the three months ended
June 30, 2000 from $135,000 for the three months ended June 30, 1999, an
increase of $1,096,000, which results from an increase to 69 leased properties
with an asset value of $108,162,000 at June 30, 2000 compared with 13 leased
properties with an asset value of $22,691,000 at June 30, 1999.
Vending operations increased to ($25,000) for the three months ended
June 30, 2000 from ($35,000) for the three months ended June 30, 1999, an
increase of $10,000 or 28.6 %
Corporate general and administrative expenses are segregated
by the Company into three separate areas: Management Company Operations,
Construction/Acquisition and Divestiture Division and Vending general and
administrative. Included in the Management Company Operations, which is the
division responsible for the motel operations, are the costs associated with
training, marketing, purchasing, administrative support, property related legal
and accounting costs. The major components of these costs are salaries, wages
and related expenses, travel, rent and other administrative expenses. The
general and administrative expenses for the Management Company Operations
decreased $2,019,000 to $1,159,000 for the three months ended June 30, 2000 from
$3,178,000 for the three months ended June 30, 1999, a decrease of 63.5%. This
is due primarily to the reduction of corporate staff and the settlement of prior
litigation as disclosed in the 1999 10K. The general and administrative expenses
associated with Construction/Acquisition and Divestiture Division decreased
$96,000 from $320,000 for the three months ended June 30, 1999 to $224,000 for
the three months ended June 30, 2000. Vending general and administrative
expenses decreased $28,000 to $89,000 for the three months ended June 30, 2000
from $117,000 for the three months ended June 30, 1999. As a percentage of total
motel operating revenues, Management Company Operations general and
administrative expenses were 7.6% for the three months ended June 30, 2000 and
11.9% for the three months ended June 30, 1999.
Depreciation and amortization decreased to $3,523,000 for the three
months ended June 30, 2000 from $3,606,000 for the three months ended June 30,
1999, a net decrease of $83,000 or 2.3%. .
Net operating income increased to $4,453,000 for the three months ended
June 30, 2000 from $4,239,000 for the three months ended June 30, 1999, an
increase of $214,000 or 5.0%. Net operating income as a percent of total
revenues was 23.4% for the three months ended June 30, 2000 as compared to 15.1%
for the three months ended June 30, 1999.
Interest expense decreased to $6,318,000 for the three months ended
June 30, 2000 from $7,397,000 for the three months ended June 30, 1999, a
decrease of $1,079,000. The decrease in interest expense is reflective of the
lower average amount of outstanding borrowings during the second quarter of 2000
as compared to the second quarter 1999.
Gain on sale of properties amounted to $1,278,000 for the three months
ended June 30, 1999 compared to $693,000 for the respective period in 2000. In
four unrelated transactions, three properties were sold for $6.2 million in cash
and $2.5 million in notes receivable and a vacant parcel of land was sold for
cost during the quarter ending June 30, 2000.
Net loss decreased to $714,000 for the three months ended June 30, 2000
from a net loss of $1,241,000 for the three months ended June 30, 1999.
Six Months Ended June 30, 2000 Compared to the Six Months Ended June 30, 1999
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
condensed consolidated financial statements presented elsewhere herein. (certain
of the 1999 numbers have been reclassified to conform to the 2000 presentation):
Supplemental Operating Results and Statistics
--------------------------------------------------------------
(unaudited)
Six Months Ended June 30
--------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
----------------- ------------------ --------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- --------- ---------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $23,717 $22,891 $ 4,183 $22,138 $ 27,900 $ 45,029
Ancillary motel revenues 1,924 1,733 160 954 2,084 2,687
-------- -------- -------- -------- --------- ---------
Total motel operating revenues 25,641 24,624 4,343 23,092 29,984 47,716
Motel costs and expenses:
Motel operating expenses 13,565 12,995 4,206 15,029 17,771 28,024
Marketing and royalty fees 1,830 1,629 362 1,605 2,192 3,234
Depreciation and amortization 3,097 2,870 1,226 3,431 4,323 6,301
-------- -------- -------- -------- --------- ---------
Total motel direct expenses 18,492 17,494 5,794 20,065 24,286 37,559
-------- -------- -------- -------- --------- ---------
$ 7,149 $ 7,130 $(1,451) $ 3,027 5,698 10,157
======== ======== ======== ========
Lease operations:
Lease revenues 4,512 630
Lease expenses 195 16
Depreciation and amortization 2,376 438
--------- ---------
1,941 176
Vending operations:
Vending revenues 480 447
Vending expenses 423 308
Depreciation and amortization 96 184
--------- ---------
(39) (45)
Corporate operations:
Other revenues, net 1,469 1,025
General and administrative expenses:
Management Company Operations 2,260 5,575
Construction/Acquisition
and Divestiture 379 440
Vending general and administrative 207 243
--------- ---------
Total general and administrative expenses 2,846 6,258
Depreciation and amortization 364 295
--------- ---------
(1,741) (5,528)
--------- ---------
Net operating income $ 5,859 $ 4,760
========= =========
Other data:
Number of motels at period end (5) 50 50 1 67 51 117
Number of rooms at period end (5) 4,421 4,424 70 4,811 4,491 9,235
Occupancy percentage (5) 63.75% 63.74% 62.73% 60.02% 63.74% 61.71%
ADR (1) (5) $ 46.23 $ 44.81 $ 47.94 $ 38.42 $ 46.25 $ 41.42
REVPAR (2) (5) $ 31.86 $ 30.72 $ 31.12 $ 24.05 $ 36.68 $ 27.09
Net operating income margin (3) 16.08% 9.55%
Net motel revenue margin (4) (5) 43.19% 43.68% 27.44% 29.17% 35.92% 36.55%
- ----------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total number
of rooms available.
(3) Net operating income margin represents net operating income divided by total
motel operating revenues plus lease revenues plus vending revenues plus
corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At June 30, 2000 and for the six months then ended, excludes amounts
related to the sixty-nine motels which are leased to third party tenants.
Total revenues decreased $13,373,000 to $36,445,000 for the six months
ended June 30, 2000 from $49,818,000 for the six months ended June 30, 1999 or
26.8% primarily as a result of the leasing activity of the Company. As lessor of
69 motels at June 30, 2000 the Company records rental income and does not
reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $29,984,000 for the six months ended June
30, 2000 from $47,716,000 for the six months ended June 30, 1999, a decrease of
$17,732,000 or 37.2%. The motel room revenues for motels owned during both
periods increased approximately $826,000 or 3.6% which was offset by a decrease
of $17,955,000 for acquired and divested motels, since January 1, 1999. The
increase in motel revenues for motels owned during both periods was attributable
principally to an increase in the average daily rate ("ADR"). The ADR for the
motels owned during both periods increased to $46.23 for the six months ended
June 30, 2000 from $44.81 for the six months ended June 30, 1998, an increase of
$1.42 or 3.2%. The occupancy percentage increased from 63.74% for the six months
ended June 30, 1999 to 63.75% for the six months ended June 30, 1999. The REVPAR
for motels owned during both periods increased to $31.86 for the six months
ended June 30, 2000 from $30.72 for the six months ended June 30, 1999, an
increase of $1.14 or 3.7%.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, insurance, linens and other operating
supplies. Motel operating expenses decreased to $17,771,000 for the six months
ended June 30, 2000 from $28,024,000 for the six months ended June 30, 1999, a
net decrease of $10,253,000 or 36.6%. The cost of operating motels owned during
both periods increased to $13,565,000 for the six months ended June 30, 2000
from $12,995,000 for the six months ended June 30, 1999, an increase of $570,000
or 4.4%. Motel operating expenses for motels acquired and divested since January
1, 1999 decreased to $4,206,000 for the six months ended June 30, 2000 from
$15,029,000 for the six months ended June 30, 1999. Motel operating expenses as
a percentage of motel revenues increased to 59.2% for the six months ended June
30, 2000 from 58.7% for the six months ended June 30, 1999. Motel operating
expenses as a percentage of motel revenues for the motels owned in both periods
increased to 52.9% for the six months ended June 30, 2000 from 52.8% for the six
months ended June 30, 1999.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to franchisers
and other related marketing expenses. Marketing and royalty fees decreased to
$2,192,000 for the six months ended June 30, 2000 from $3,234,000 for the six
months ended June 30, 1999, a decrease of $1,042,000 or 32.2%. The marketing and
royalty fees for motels owned during both periods increased to $1,830,000 for
the six months ended June 30, 2000 from $1,629,000 for the six months ended June
30, 1999, an increase of $201,000 or 12.3%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues increased
to 7.7% for the six months ended June 30, 2000 from 7.1% for the six months
ended June 30, 1999, an increase of 8.5%. The decrease in marketing and royalty
fees is attributable to a reduction in franchise fees due to the decline in room
revenues on which most such fees are based and a reduction in rates for certain
contractual franchise fees due to the number of motels either sold or leased
subsequent to June 30, 1999. Marketing and royalty fees for motels acquired and
divested since January 1, 1999 decreased to $362,000 for the six months ended
June 30, 2000 from $1,605,000 for the six months ended June 30, 1999.
Lease operations increased to $1,941,000 for the six months ended June
30, 2000 from $176,000 for the six months ended June 30, 1999, an increase of
$1,765,000, which results from an increase to 69 leased properties with an asset
value of $108,162,000 at June 30, 2000 compared with 13 leased properties with
an asset value of $22,691,000 at June 30, 1999.
Vending operations increased to ($39,000) for the six months ended June
30, 2000 from ($45,000) for the six months ended June 30, 1999, an increase of
$6,000 or 13.3 %
Corporate general and administrative expenses are segregated by the
Company into three separate areas: Management Company Operations, Construction
and Development and Vending general and administrative. Included in the
Management Company Operations, which is the division responsible for the motel
operations, are the costs associated with training, marketing, purchasing,
administrative support, property related legal and accounting costs. The major
components of these costs are salaries, wages and related expenses, travel, rent
and other administrative expenses. The general and administrative expenses for
the Management Operations decreased $3,315,000 to $2,260,000 for the six months
ended June 30, 2000 from $5,575,000 for the six months ended June 30, 1999, a
decrease of 59.5%. This is due primarily to the reduction of corporate staff and
the settlement of prior litigation as disclosed in the 1999 10K. The general and
administrative expenses associated with Construction and Development decreased
$61,000 from $440,000 for the six months ended June 30, 1999 to $379,000 for the
six months ended June 30, 2000. Vending general and administrative expenses
decreased $36,000 to $207,000 for the six months ended June 30, 2000 from
$243,000 for the six months ended June 30, 1999. As a percentage of total motel
operating revenues, Management Operations general and administrative expenses
was 7.5% for the six months ended June 30, 2000 and 11.7% for the six months
ended June 30, 1999.
Depreciation and amortization decreased to $7,159,000 for the six
months ended June 30, 2000 from $7,218,000 for the three months ended June 30,
1999, a net decrease of $59,000 or 0.8%.
Net operating income increased to $5,859,000 for the six months ended
June 30, 2000 from $4,760,000 for the six months ended June 30, 1999, an
increase of $1,099,000 or 23.1%. This is a result of a decrease in management
company operations expenses of $3,316,000 and in an increase of $1,765,000 in
lease operations. Net motel revenues for motels acquired and divested since
January 1, 1999 decreased $6,684,000. Net operating income as a percent of total
revenues was 16.1% for the six months ended June 30, 2000 as compared to 9.6%
for the six months ended June 30, 1999.
Interest expense decreased to $12,845,000 for the six months ended June
30, 2000 from $14,703,000 for the six months ended June 30, 1999, a decrease of
$1,858,000. The decrease in interest expense is reflective of the lower average
amount of outstanding borrowings during the six months ending June 30, 2000 as
compared to the six months ending June 30, 1999.
Gain on sale of properties amounted to $1,652,000 for the six months
ended June 30, 1999 compared to $1,084,000 for the period ended June 30, 1998.
In six unrelated transactions, six properties were sold for $7.9 million in cash
and $6.5 million in notes receivable, also a vacant parcel of land was sold for
cost during the six months ended June 30, 2000.
Net loss decreased to $1,335,000 for the six months ended June 30, 2000
from a net loss of $5,149,000 for the six months ended June 30, 1999 primarily
as a result of an increase of $1,099,000 in net operating income and an
extraordinary gain net of tax of $2,255,000 on extinguishment of a portion of
the subordinated notes payable.
Liquidity and Capital Resources
The Company's primary uses of its capital resources include debt
service, capital expenditures and working capital. In addition, on a
discretionary basis, the Company utilizes its capital resources for the
development and acquisition of motel properties.
The Company's debt service requirements consist of the
obligation to make interest and principal payments on its outstanding
indebtedness.
In January 2000, the Company borrowed $1.7 million at prime
plus .5% with monthly principal payments of $212,500 due October 1, 2000.
In March 2000, the Company repurchased an additional $10.5
million of the 12% Senior Subordinated Notes from an affiliate for a net gain of
$3.7million. As part of the transaction the Company assumed a $4.4 million
margin account liability with an annual interest rate of 9% paid monthly and due
on demand.
In April 2000, the Company borrowed $2,100,000 at 9.25% with
monthly principal and interest payments of $19,408 due in seven years, secured
by one property in Merrimack, New Hampshire.
In May 2000, the Company borrowed $3,300,000 at 10.5% for four
years with monthly principal and interest payments of $84,491.
The Company believes it has or will be able to obtain adequate
resources to meet its near-term maturing debt and other obligations.
The Company's capital expenditure requirements principally include
capital improvements and refurbishment of its lodging facilities as part of its
ongoing operating strategy to provide well-maintained facilities. The Company
made capital expenditures (exclusive of acquisitions and development of
properties) of $2,706,000 and $4,054,000 for the six months ended June 30, 2000
and 1999, respectively. In addition, as of June 30, 2000, the Company had
$2,395,000 of cash restricted for future refurbishment of motel properties, in
accordance with certain debt agreements. Management is not aware of any unusual
required level of future capital expenditures necessary to maintain its existing
properties.
For the six months ended June 30, 2000, cash and cash equivalents
increased $3,228,000. This increase consisted of $4,653,000 of funds provided by
investing activities and $513,000 of funds used in financing activities and
$2,012,000 of funds used in operations. Net investing activities of $5,753,000
include: $1,096,000 of cash utilized for motel development and $2,706,000
expended on refurbishment of existing properties, offset by $10,099,000 of cash
provided from the sale of investment properties and collections on mortgage and
other notes receivable and a change in cash restricted for refurbishment of
$544,000. Cash used in financing activities includes: $11,728,000 of cash
utilized to repay indebtedness; and $764,000 of cash used for deferred financing
costs and other items offset by $11,979,000 from proceeds from notes payable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings arising in the
ordinary course of business. The Company does not believe that any of these
actions, either individually or in the aggregate, will have a material adverse
effect on the Company's business, results of operations or financial condition.
See Note 5 of the Notes to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Not Applicable
(b) Reports on Form 8-K:
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOA HOSPITALITY, INC.
December 20, 2000 By: /s/ Kurt M. Mueller
-------------------------------------
Kurt M. Mueller
President and Chief Financial Officer
December 20, 2000 By: /s/ Blane P. Evans
-------------------------------------
Blane P. Evans
Secretary and Treasurer