UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
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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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 803-1200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[X] Yes [ ] No
Number of shares of Common Stock, $.01 par value outstanding as of
May 30, 2001: 800,000
INDEX TO FORM 10-K
Page
Part I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Part II
Item 5. Market for Registrant's Common Equity and 14
Related Stockholder Matters
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of 16
Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosure 25
About Market Risk
Item 8. Financial Statements and Supplementary Data 26
Item 9. Changes in and Disagreements with Accountants 26
on Accounting and Financial Disclosure
Part III
Item 10. Directors and Executive Officers of the Registrant 27
Item 11. Executive Compensation 29
Item 12. Security Ownership of Certain Beneficial Owners 30
and Management
Item 13. Certain Relationships and Related Transactions 30
Part IV
Item 14. Exhibits, Financial Statement Schedules, and 31
Reports on Form 8-K
ITEM 1. BUSINESS
General
MOA Hospitality, Inc. and its subsidiaries ("MOA" or the "Company")
is a leading owner and operator of national brand affiliated limited service
lodging facilities in the United States. As of December 31, 2000, the Company,
directly and through subsidiaries, owned 118 lodging facilities located in 38
states with a total of 9,175 rentable guestrooms. The Company owns a 100%
interest in all but one of its properties. At December 31, 2000, the Company
operated all of its motels with the exception of seventy-five motels that were
leased to and operated by third-party tenants pursuant to operating leases. The
Company's largest concentrations of lodging facilities are located in the States
of Georgia and Illinois with 13 lodging facilities in Georgia and 10 lodging
facilities in Illinois. Properties owned in the states of Illinois and Georgia
at December 31, 2000, accounted for 3.7% and 6.1% of consolidated motel
operating revenues for the year ended December 31, 2000, respectively. One
hundred and seven of the Company's lodging facilities are operated pursuant to
franchise or license agreements under the following national brand names: Best
Western, Comfort Inn, Day's Inn, Microtel, Howard Johnson, Ramada, Ltd., Super 8
and Travelodge. Ninety-five of the franchise or license agreements are with
brands owned by Cendant Corporation including eighty-two with Super 8 Motels,
Inc., a wholly owned subsidiary of Cendant Corporation. MOA believes its lodging
facilities benefit from affiliating with national brands primarily due to the
national brand name recognition achieved through national advertising and
product distribution. In addition, the franchisor or licensor typically provide
additional services such as: central reservation services, sponsorship of
customer loyalty programs, exposure in published travel directories, leads with
respect to group tour business and other professional services such as quality
assurance inspections.
The Company was incorporated in 1986 under the laws of the State of
Delaware to continue the business commenced by its predecessors in 1982. The
Company's principal executive offices are located at 701 Lee Street, Suite 1000,
Des Plaines, Illinois 60016, telephone (847) 803-1200.
Recent History
The Company, has experienced deterioration in its operating
performance over the past several years. The following table summarizes the
recent operating performance of the Company (in 000's):
1996 1997 1998 1999 2000
-------- -------- --------- --------- ---------
Loss from Operations prior to Impairment
Losses and Restructuring Costs $(1,080) $(3,137) $(11,474) $(13,485) $(12,145)
Impairment Losses and Restructuring Costs - (3,276) (9,300) (1,378) -
-------- -------- --------- --------- ---------
Loss from Operations $(1,080) $(6,413) $(20,774) $(14,863) $(12,145)
======== ======== ========= ========= =========
The Company, through its aggressive leasing and sales efforts during
1999 and 2000 has been able to either stabilize net income on some of its
non-core locations by establishing a fixed lease income, or by selling other
non-desirable locations. The Company believes it is now positioned to continue
concentrating its efforts on the remaining core locations to maintain and or
increase the upward trend.
The Company had attributed the deterioration in its operating
performance to a myriad of factors, including but not limited to, a significant
increase in competitive supply resulting from the extensive building of new
motel properties in the markets in which the Company competes. Also increases in
certain operating costs including labor due to the historically low levels of
unemployment requiring the Company to compete with other industries for
qualified employees. Based on a property-by-property review, the Company
believed it was unlikely that it would realize the carrying value of certain of
its assets due to a deterioration in their operating performance caused by
factors outside of management's control. As a result of this review, the Company
recorded an impairment loss of $928,000 and a restructuring charge of $450,000
in 1999. In 1998, the Company recorded an impairment loss of $9.3 million. In
1997, the Company also recorded impairment losses of $2.5 million and
restructuring charges of $750,000. As discussed below, the Company has
undertaken a number of transactions during the period presented above including
acquisitions, development and sales of properties along with refinancing of the
Company's mortgage debt. The Company believes it has or will be able to obtain
adequate resources to meet its near-term maturing debt and other obligations,
including the remaining $13.5 million 12% Senior Subordinated Notes in 2004.
Since December 31, 1996, the Company has had a net decrease in the
number of lodging properties owned from 135 properties to 118 properties at
December 31, 2000. A summary of the significant transactions with respect to the
number of lodging properties owned and operated by the Company that have
occurred since January 1, 1997 through April 20, 2000 is as follows:
In 1997, an affiliate of the Company was formed for the sole purpose
of constructing lodging properties to be acquired by a subsidiary of the Company
upon completion at cost. Such affiliate develops the lodging properties from its
own funds, payments from the Company on account to be applied towards the
purchase price and the proceeds of a $20.0 million revolving construction loan
facility arranged by the affiliate. In connection with the construction loan
facility, the Company had guaranteed completion of the construction of each
property and the subsidiary acquiring the properties had guaranteed the
construction loan facility to a maximum of $10.0 million. This facility provided
for, among other things, interest computed at a rate based upon the thirty (30)
day LIBOR rate plus 300 basis points, monthly principal and interest payments at
an 11.5% per annum constant, and repayment in full of each funding made pursuant
to the facility forty-two (42) months after the date of each such funding. In
addition, the Company has pledged its interest in a wholly owned subsidiary to
secure up to $20.0 million of borrowing under the facility. The $20.0 million
revolving construction loan facility of the affiliate matured in 1998. The
outstanding balances were paid in full upon the purchase of financed properties
by a subsidiary of the Company with funds borrowed under the $150.0 million
secured loan facility with CSFB and the application of amounts previously
deposited with the affiliate. At December 31, 1998 the $150.0 million secured
loan facility with CSFB matured with no further borrowings available with this
loan facility. At December 31, 2000, approximately $14.7 million of borrowings
were outstanding under the $150.0 million CSFB secured loan facility. Ten
properties and a pledge of the common stock of the subsidiary that owns such
properties secure the amount outstanding. As a result of the Company's under
utilization of the CSFB loan facility, the Company changed its estimate of the
economic benefit of certain deferred loan costs incurred in connection with
obtaining the facility and accordingly accelerated the amortization of $1.9
million of such costs in 1998.
During 1998, the Company, in a series of separate transactions with
unaffiliated parties, sold ten properties for approximately $61.3 million
consisting of cash in the amount of $53.0 million and first mortgage notes in
the amount of $8.3 million. These transactions resulted in a net gain of
approximately $23.7 million. Approximately $33.3 million of the net proceeds
were utilized to pay down certain outstanding borrowings. During 1998, the
Company also sold a parcel of vacant land and an investment in a partnership for
an aggregate amount of $4.2 million in cash that resulted in gains of
approximately $2.4 million.
During 1998, the Company acquired seven newly constructed motels from
an affiliate at cost for an aggregate amount of $20.6 million in cash. The
purchases of these motels were funded from $11.4 million of new borrowing under
the CSFB secured loan facility referred to above, application of amounts
previously deposited with the affiliate and from internally generated funds,
including funds from the net proceeds from the sale of properties.
During 1999, the Company sold ten properties for approximately $27.8
million consisting of $9.7 million in cash and $18.1 million in first mortgage
notes. These sale transactions resulted in gains of $2.5 million.
Also during 1999, the Company purchased one property constructed by
an affiliate for the Company. The property was purchased for $ 2.9 million.
During 1999, the Company repurchased from an affiliated company $35
million of the 12% Senior Subordinated Notes at a gain of approximately $1.9
million which was offset by the accelerated write-off of related deferred
financing costs in the amount of $1.9 million
During 2000, the Company sold eight properties and a vacant parcel of
land for approximately $20.8 million consisting of $14.3 million in cash and
$6.5 million in first mortgage notes. These sale transactions resulted in a gain
of $2.2 million. The Company also purchased a parcel of land in February 2000
for approximately $250,000 cash and a note in the amount of $460,000, which was
repaid in 2000.
Also during 2000, in two separate transactions the Company
repurchased from an affiliated company $10.5 million and $20.9 million of the
12% Senior Subordinated Notes at a pre tax gain of approximately $4.2 million
and $6.7 million respectively. Theses gains were offset by the accelerated
write-off of related deferred financing costs in the amount of $0.6 million and
$1.1 million respectively.
During 2000, the Company began construction on two new motels. One
motel is located in Milford, MA and when completed in mid-2000, will be a
Marriott Fairfield Inn & Suites with 73 guestrooms. The other motel will be
located in Santa Monica, CA and will be a boutique type motel with 77 guest
rooms when completed in 2001. Subsequent to December 31, 2000 construction
financing was secured in the amounts of $3.5 million and $7.0 million,
respectively.
The Company, as Lessor, has entered into operating leases, primarily
in 1999 and 2000 with unaffiliated parties to operate seventy-five motel
properties at market rates. Under the terms of these leases, the lessee is
responsible for operating costs including all maintenance, repairs, taxes and
insurance expense on the leased property. The leases, which have a terms ranging
from five and a half years to six and half years, provide for monthly rent
payments. In addition, the lease grants the lessee an option to purchase the
leased properties at prices believed by management to reflect market value.
Industry and Competition
The United States lodging industry is generally comprised of two
sectors: full-service facilities and limited-service facilities. Full-service
lodging facilities generally have more extensive common areas (including
restaurants, lounges and extensive meeting room facilities), offer more services
such as bell service and room service, and tend to be larger in terms of number
of rooms than limited-service facilities. MOA's properties are principally
limited-service type lodging facilities. The United States lodging industry is
also categorized into five general price segments (based on relative pricing in
local markets): luxury, upscale, mid-price, economy, and budget. MOA's
properties predominately fall into the economy segment with a small percentage
represented in both the mid-price and budget segments. Industry estimates
indicate that there are over 23,000 lodging facilities within the mid-price,
economy and budget segments. The United States lodging industry is also
generally considered to be relatively fragmented in terms of ownership,
especially with respect to the mid-price, economy and budget segments. This
combination of a large number of competitive lodging facilities and limited
concentration of ownership makes the segment in which MOA's lodging facilities
operate very competitive.
Generally, each of the Company's lodging facilities competes within
its local market with several national and regional brand affiliated lodging
facilities along with many independent competitive lodging facilities. Some of
the more recognizable brands with which the Company's lodging facilities compete
either directly or indirectly include: Baymont Inns (f/k/a Budgetel Inns),
Comfort Inns, Day's Inns, Fairfield Inns, Hampton Inns, Holiday Inn Express,
LaQuinta Inns, Motel 6, Ramada, Ltd., Red Roof Inns, Super 8 Motels and
Travelodge. Distinguishing characteristics among competitive lodging facilities
include: convenience of location, degree of curb appeal, reasonableness of room
rates, and in particular with repeat customers the quality and cleanliness of
room accommodations and the level of service.
The Company competes with other lodging facilities for a wide
spectrum of business and leisure travelers who desire consistency in the quality
of their accommodations and demand reasonable prices. They tend to be value
conscious consumers consisting of: construction workers, sales people,
technicians, senior citizens, government and military employees, and vacation
travelers. Due to the nature and location of the Company's lodging facilities,
the Company does not experience any significant degree of advance bookings
typical with many resort or destination locations nor does any one customer
represent a significant portion of the Company's revenues.
The lodging industry has seen a significant increase in the
construction of new lodging facilities over the course of the past few years.
Management believes this increase is a result of the relative strength of the
United States' economy, which in turn has resulted in greater travel, and
stronger operating performance of lodging facilities in general. Management also
believes the increase in new construction has been facilitated by an increased
availability of financing for such projects and a relatively favorable interest
rate environment. Based on the Company's internally prepared surveys of new
supply entering the markets in which it competes, the percentage increase in new
supply in such markets appears to have peaked in 1996; however, new supply
continues to enter the markets in which the Company competes. Accordingly, new
supply is expected to continue to negatively impact the Company's operating
performance especially during the off-peak seasons.
Demand for the Company's lodging facilities is affected by normally
recurring seasonal patterns. Demand for the Company's lodging facilities is
generally highest during the months of June, July and August and lowest during
the months of December, January and February. As is the case for the lodging
industry in general, demand for the Company's lodging facilities may be affected
by weather, national and regional economic conditions, government regulations,
changes in travel patterns including temporary interruptions due to road
construction and more permanent interruptions due to the development of new
interchanges and alternative routes, construction of new lodging facilities,
changes in the degree of competition from existing lodging facilities and other
factors.
Ownership Structure
At December 31, 2000, the Company had 100% ownership interest, either
directly or through subsidiaries, in 117 of the 118 lodging facilities it owned.
The Company was a general partner with ownership interests of 30% in one
individual limited partnership of which owned one lodging facility as its
principal asset. This partially owned lodging facility has been consolidated for
financial reporting purposes due to the management and control, which the
Company possesses. Seventy-five are subject to operating leases with purchase
options. (See discussion above in the general business section)
Franchise and License Agreements
The Company operates 107 of its lodging facilities pursuant to
franchise or license agreements. Eighty-two of these agreements are with Super 8
Motels, Inc. The franchise fees (including royalties and contributions to
advertising and media funds) range from 6% to 9% of room revenues. Under the
Super 8 franchise agreements, the franchiser is obligated to: provide certain
standardized training programs; publish a travel directory with information
pertaining to all Super 8 motels; maintain an advertising and reservation fund
to be administered by the franchiser for advertising and promotion; inspect the
motels to assure satisfaction of Super 8 specifications and maintain
availability of corporate officers and employees for consultation concerning
motel operations. The obligations of the franchisee include, among other things,
maintaining the motel in a manner that satisfies Super 8 quality assurance
standards and compliance with Super 8 rules of operations.
The Super 8 franchise agreements have an initial 20-year term that,
for the Company, results in various ending dates ranging from 2001 through 2019.
The agreements continue thereafter on a year-by-year basis unless terminated by
either party upon nine months notice. The agreements provide a negotiated area
of geographic protection within which the franchiser is prohibited from
franchising another Super 8 motel. Upon expiration of individual franchise
agreements there is no assurance that a renewal franchise agreement will afford
the Company the same benefits that existed under the previously existing
franchise agreement. Generally, new franchise agreements have higher franchise
fees and reduced areas of protections.
The Company has three standard license agreements with Best Western
International. These agreements provide for an annual renewal.
The Company has twenty-five franchise or license agreements with
other franchisers or licensees. These agreements, which have various terms with
ending dates through 2017, generally provide similar benefits and obligations as
the Super 8 franchise agreements. Not all of franchise and license agreements
for the non Super 8 brands provide for a specific area of geographic protection
in which case, they generally rely on an impact policy to determine if another
lodging facility with the same brand affiliation could be located within a
particular market.
During 1997, the Company and certain of its subsidiaries commenced
legal actions against ShoLodge Franchise Systems, Inc. ("ShoLodge") the
franchisor of Shoney's Inns. The Company among other things has claimed that
ShoLodge has breached its contractual obligations and made material
misrepresentations to MOA prior to MOA or its subsidiaries acquiring any
Shoney's Inns. Commencing in February 1998, through May 1998 the Company
disaffiliated each of its fourteen Shoney's Inns from ShoLodge by removing the
sign and other identifying marks. At the time of such disaffiliation, MOA or its
subsidiaries ceased remitting franchise fees to ShoLodge. ShoLodge filed a
counter claim against MOA and certain of its subsidiaries claiming a failure to
renovate the properties and failure to pay franchise fees. In July 1999, the
Company entered into a settlement agreement with ShoLodge resolving all disputes
with respect to the litigation initiated by the Company. The settlement
agreement requires the Company to make an initial payment of $575,000 in July
1999 and three subsequent payments of $200,000 in July 2000, 2001 and 2002.
Operations
The Company believes the ownership and management of its properties
gives it certain competitive advantages over third party managed properties with
which it competes by being able to control all aspects of a lodging facility's
operations and expenditures to maintain such facilities. The Company also
believes it has certain competitive advantages over chain owned and operated
properties because as long as the Company meets a franchisor's minimum
requirements it can tailor the services and product offering of individual
facilities without concerning itself with national consistency.
Management of the Company's lodging facilities is coordinated from
the Company's corporate offices in Des Plaines, Illinois. During the last
quarter of 1999, the Company recorded a $450,000 restructuring charge for the
downsizing of both the regional and corporate offices. During 1997, the Company
undertook a reorganization of its management infrastructure and implemented a
more decentralized organization structure whereby many of the property
management support functions previously based out of the corporate office in Des
Plaines, Illinois were moved to various regional offices which were established.
This decentralization was undertaken in order to enhance the Company's
responsiveness, efficiency and control with respect to the day-by-day operations
of its properties. In conjunction with this reorganization, the Company recorded
a charge, in the second quarter of 1997, in the amount of $750,000 to cover the
cost of restructuring. The regional offices are located in Indianapolis,
Indiana, Weldon, North Carolina and Salt Lake City, Utah. Day-to-day management,
facility renovation, human resources and training, purchasing of operating
supplies and sales and marketing are principally directed from the regional
offices. The executive level functions as well as accounting and construction
continue to be centralized in Des Plaines, Illinois.
Typically, the general manager is the only salaried position at a
property; although, for the larger properties (generally in excess of 100
rooms), an assistant manager and/or salesperson may be present on a salaried
basis. Other employees generally are employed on an hourly basis with staffing
continually adjusted based on occupancy levels. General managers generally do
not reside on site because the Company believes its managers are more effective
if they spend time away from the property and become involved in the communities
where the properties are located. At December 31, 2000, the Company employed
approximately 892 employees including approximately 31 full and part-time
employees at the corporate and regional offices. Labor and related costs
generally represent the single largest expense of operating a motel property.
The hourly wage rates tend to be relatively low in relation to other industries
and accordingly, the Company is adversely affected by turnover common in the
industry partially due to the current strength of the United States economy that
has resulted in historically low unemployment rates. The Company's operations
could be significantly affected by changes in the Federal and State minimum wage
rates. The employees are not represented by any labor unions and management
believes its ongoing labor relations with its employees are good.
The Company utilizes advertising and marketing programs sponsored by
the various franchisers on both a national and regional basis. In addition, the
Company engages in a wide variety of sales and marketing activities at the local
market level including extensive individual sales calls, marketing blitzes and
involvement in local community activities such as Rotary Clubs, Chambers of
Commerce and motel associations. Various properties also promote special
packages in conjunction with local attractions or events. Billboard advertising
represents the single largest sales and marketing expenditure other than
contributions to franchiser sponsored advertising and media funds.
Regulatory Matters
The Company is subject to environmental regulations under various
federal, state and local laws. Certain of these laws may require a current or
previous owner or operator of real estate to clean up designated hazardous or
toxic substances or petroleum product releases affecting the property. In
addition, the owner or operator may be held liable to a governmental entity or
to third parties for damages or costs incurred by such parties in connection
with the contamination.
Certain of the Company's lodging facilities are located on, adjacent
to or in the vicinity of, properties, including gasoline stations, that contain
or have contained storage tanks or that have engaged or may in the future engage
in activities that may release petroleum products or other hazardous substances
into the soil or groundwater.
While there can be no assurance that in the future the foregoing
environmental conditions may not have a material effect on the Company,
management is not aware of any such materially adverse impacts to the Company
due to the existence of contaminants under or near its properties. Except as
described above, management is not aware of any environmental condition with
respect to its lodging facilities that could have a material adverse impact on
the Company's financial condition or results of operations.
The Company's lodging facilities are subject to various other laws,
ordinances and regulations. The Company believes that each facility has the
necessary permits and approvals required to enable the Company to operate its
lodging facilities.
The Company's lodging facilities must comply with Title III of the
Americans with Disabilities Act (the "ADA"). Under the provisions of the ADA,
the Company, as owner of the lodging facilities, is obligated to reasonably
accommodate the patrons of its facilities who have physical, mental or other
disabilities. In addition, the Company is obligated to ensure that alterations
to its lodging facilities conform to the specific requirements of the ADA
implementing regulations. The Company believes that it is in substantial
compliance with all current applicable regulations with respect to
accommodations for the disabled.
ITEM 2. PROPERTIES
The Company's lodging facilities are typically situated along
interstate highways and in secondary markets, offering a convenient lodging
alternative for many prospective customers. The facilities have an average size
of 78 rooms, though individual properties range from 33 to 187 rooms, depending
on location and business environment. MOA's properties generally do not offer
large meeting or banquet facilities, in-house restaurants, or room service; and
most do not offer recreational facilities such as pools or fitness centers. The
motels do, however, typically provide free coffee, free local calls, remote
control television, fax service, and free parking. In addition, many nationally
and regionally recognized restaurant chains are generally within close proximity
of the motels.
The Company generally owns its motels in fee simple. The company has
leased seventy-five properties subject to operating leases including a purchase
option. However, the underlying real property of three of the lodging facilities
is subject to a ground lease. Ownership of the buildings and improvements
situated on such properties reverts to the landlord upon the expiration of the
lease term.
Most of the Company's properties were designed and built as limited
service economy lodging facilities. As such, they were designed to achieve
functional efficiencies and operate at lower fixed costs than most full service
or upscale lodging facilities. The properties generally employ individual
through-the-wall heating and cooling systems for each room. This provides cost
savings during periods of low occupancy and eliminates the need to have skilled
maintenance personnel on the payroll. Further, the Company's motels have limited
public areas to maintain.
The Company believes that the physical condition and general appearance
of a property have a significant impact on profitability. MOA has made capital
expenditures (exclusive of acquisitions and development of investment
properties) of $4,641,000, $8,055,000, and $5,696,000 in 2000, 1999 and 1998,
respectively. These expenditures include not only the replacement of guestroom
carpet and furnishings but also expenditures on parking lot repavement, exterior
renovations and interior public area renovations including lobby enhancements
and other revenue enhancing improvements such as installation of complete snack
shoppe vended areas and guest laundry facilities. Management believes the level
of capital expenditures made over the past three years has been sufficient to
maintain the competitive position of its motel facilities. The Company believes
that its facilities are currently well maintained and conform to the Company's
standards and where applicable to the franchiser's standards for cleanliness and
attractiveness and intends to maintain its facilities in such condition.
Information pertaining to the Company's 118 lodging facilities owned as of
December 31, 2000 with footnote disclosure of transactions subsequent to
year-end through April 20, 2001, is set forth in the following table.
YEAR
NUMBER OF ACQUIRED OR
RENTABLE DEVELOPED
GUEST YEAR BY THE
LOCATION FRANCHISE ROOMS BUILT COMPANY
- -------- --------- --------- ----- -----------
ARKANSAS
West Memphis (1) Super 8 61 1989 1989
ARIZONA
Phoenix Super 8 67 1998 1998
CALIFORNIA
Santa Monica Best Western 122 1991 1992
West Los Angeles Best Western 76 1993 1994
COLORADO
Longmont Super 8 64 1989 1994
FLORIDA
Fernandina Beach (2) Inn at Fernandina Beach 134 1985 1994
Ft. Walton Beach Howard Johnson 100 1987 1994
Lake City (4) Microtel 62 1998 1998
Melbourne (2) Howard Johnson 119 1990 1994
Orlando Centroplex (1) Travelodge 75 1957 1996
Panama City (2) Super 8 63 1986 1987
Pensacola (2) Super 8 62 1985 1987
GEORGIA
Athens (2) Microtel 60 1998 1998
Brunswick (2) Super 8 58 1986 1987
Catersville (2) Super 8 61 1986 1987
Columbus Super 8 74 1985 1987
Douglas (4) Inn at Douglas 100 1986 1994
Dublin (2) Best Western 88 1984 1994
Fitzgerald (2) Inn at Fitzgerald 108 1985 1994
Hinesville (2) Inn at Hinesville 163 1976 1994
Macon (2) Ramada 120 1987 1994
Moultrie (2) Inn at Moultrie 100 1979 1994
Rome (2) Super 8 62 1986 1987
Vidalia (2) Inn at Vidalia 128 1984 1994
Warner Robins (2) Super 8 60 1986 1987
IDAHO
Boise Super 8 108 1978 1994
Coeur d'Alene (1) Super 8 95 1983 1983
Lewiston (2) Super 8 62 1985 1985
Sandpoint Super 8 61 1984 1984
ILLINOIS
Bloomington (2) Super 8 61 1985 1987
Champaign (2) Super 8 61 1984 1987
Crystal Lake Super 8 59 1983 1987
Decatur (2) Super 8 61 1983 1987
Litchfield (2) Super 8 61 1987 1994
Peru (2) Super 8 61 1986 1987
South Springfield (2) Super 8 118 1987 1994
Springfield (2) Super 8 65 1985 1994
Tuscola Super 8 64 1988 1994
Waukegan (2) Super 8 61 1986 1987
YEAR
NUMBER OF ACQUIRED OR
RENTABLE DEVELOPED
GUEST YEAR BY THE
LOCATION FRANCHISE ROOMS BUILT COMPANY
- -------- --------- --------- ----- -----------
INDIANA
Columbus (2) Super 8 62 1984 1987
Elkhart (2) Fairway Inn 60 1990 1994
Elkhart (2) Super 8 62 1986 1989
Indianapolis (2) Days Inn 161 1985 1994
Mishawaka Super 8 66 1998 1998
Muncie (2) Days Inn 62 1990 1994
Terre Haute Super 8 118 1985 1994
IOWA
Davenport (2) Super 8 61 1984 1987
Des Moines Super 8 152 1985 1994
KANSAS
Salina Super 8 61 1984 1989
Topeka (2) Super 8 62 1984 1987
KENTUCKY
Danville (2) Super 8 49 1987 1987
Lexington (2) Super 8 61 1987 1987
Louisville Super 8 100 1988 1988
LOUISIANA
Shreveport (2) Super 8 143 1986 1994
MASSACHUSETTS
Milford Days Inn 69 1997 1997
MAINE
Ellsworth Comfort Inn 63 1993 1993
MICHIGAN
Battle Creek (2) Super 8 62 1985 1987
Grand Rapids (2) Super 8 62 1986 1987
Kalamazoo (2) Super 8 62 1985 1987
Muskegon (2) Days Inn 106 1968 1993
Muskegon (2) Super 8 62 1986 1987
Saginaw (2) Super 8 58 1985 1987
MINNESOTA
Hibbing (2) Super 8 49 1993 1994
Red Wing (2) Super 8 60 1987 1996
Savage (2) Comfort Inn 75 1982 1994
MISSOURI
Independence (2) Super 8 77 1983 1987
Joplin Super 8 50 1985 1987
Liberty (2) Super 8 60 1980 1987
NW Kansas City (2) Super 8 50 1983 1987
St. Joseph Super 8 54 1985 1987
St. Louis (2) Super 8 99 1984 1987
Springfield (2) Super 8 50 1985 1987
MONTANA
Billings Ramada Ltd. 116 1978 1994
Billings Super 8 114 1979 1994
Dillon Super 8 48 1985 1989
Great Falls Super 8 117 1978 1994
Helena Super 8 102 1979 1988
YEAR
NUMBER OF ACQUIRED OR
RENTABLE DEVELOPED
GUEST YEAR BY THE
LOCATION FRANCHISE ROOMS BUILT COMPANY
- -------- --------- --------- ----- -----------
NEBRASKA
Fremont (2) Super 8 43 1986 1989
NEVADA
Carson City (2) Super 8 63 1985 1985
Wendover Super 8 74 1988 1988
NEW HAMPSHIRE
Merrimack Days Inn 70 1999 1999
NEW MEXICO
Las Cruces (2) Super 8 60 1981 1987
NEW YORK
East Syracuse Super 8 53 1997 1997
NORTH CAROLINA
Weldon (2) Orchard Inn 49 1973 1993
Wilson Microtel 59 1997 1997
NORTH DAKOTA
Bismarck Super 8 61 1976 1987
Grand Forks (2) Super 8 33 1983 1987
Minot (2) Super 8 60 1977 1987
OHIO
Akron (2) Super 8 58 1986 1987
Canton (2) Days Inn 61 1985 1987
Maumee Super 8 68 1998 1998
St. Clairsville (2) Super 8 62 1986 1987
Willoughby (3) Travelodge 111 1984 1996
PENNSYLVANIA
Lancaster Super 8 101 1990 1990
York Super 8 94 1990 1990
SOUTH CAROLINA
Anderson (2) Super 8 62 1986 1987
Camden (2) Inn at Camden 83 1989 1994
Charleston (2) Orchard Inn 89 1973 1993
Columbia (2) Microtel 48 1997 1997
Greenwood (2) Days Inn 61 1986 1987
SOUTH DAKOTA
Sioux Falls (2) Super 8 95 1976 1987
TENNESSEE
Chattanooga (2) Super 8 73 1986 1987
East Memphis (2) Super 8 69 1990 1990
Johnson City (2) Super 8 60 1986 1987
Knoxville Super 8 137 1975 1993
Union City (2) Super 8 61 1989 1989
TEXAS
Stafford (2) Microtel 68 1998 1998
UTAH
Salt Lake City (3) Super 8 119 1983 1988
VIRGINIA
Charlottesville (2) Super 8 65 1986 1987
Richmond (2) Inn at Richmond 117 1985 1994
YEAR
NUMBER OF ACQUIRED OR
RENTABLE DEVELOPED
GUEST YEAR BY THE
LOCATION FRANCHISE ROOMS BUILT COMPANY
- -------- --------- --------- ----- -----------
WASHINGTON
Spokane Super 8 187 1982 1988
WEST VIRGINIA
Mineral Wells Microtel 54 1998 1998
WISCONSIN
Janesville (2) Super 8 48 1985 1987
Kenosha (2) Super 8 60 1984 1987
Madison Best Western 101 1983 1994
Rice Lake (2) Super 8 47 1984 1994
WYOMING
Cody Super 8 64 1982 1982
Jackson Super 8 97 1983 1983
-----
Total 9,175
=====
(1) Property is subject to a ground lease.
(2) Property is subject to an operating lease.
(3) Property leased to a third-party tenant subsequent to December 31, 2000.
(4) Property lessee defaulted on the operating lease subsequent to
December 31, 2000 and is now operated by the Company.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fiscal quarter ended
December 31, 2000 to a vote of the security holders of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of April 20, 2001, there were approximately 12 holders of record
of the Company's Common Stock. No established public trading market exists for
the Company's common equity. The Company has been advised that since its
original issuance there have been a limited number of privately negotiated sales
of the Common Stock.
The Company has never paid cash dividends on its Common Stock. It is
the Company's present intention to retain all future earnings for use in its
business and, therefore, it does not expect to pay cash dividends on the Common
Stock in the foreseeable future. The declaration and payment of dividends on the
Common Stock is restricted by the indenture relating to the 12% Senior
Subordinated Notes due April 15, 2004, Series B issued by the Company in April
1994 (the "Notes") and the instruments relating to the Company's other
indebtedness.
During 1999, the Company repurchased from an affiliated company $35
million of the 12% Senior Subordinated Notes at a gain of approximately $1.9
million which was offset by the accelerated write-off of related deferred
financing costs in the amount of $1.9 million.
During 2000, in two separate transactions the Company repurchased
from an affiliated company $10.5 million and $20.9 million of the 12% Senior
Subordinated Notes at a gain of approximately $4.2 million and $6.7 million
respectively. Theses gains were offset by the accelerated write-off of related
deferred financing costs in the amount of $0.6 million and $1.1 million
respectively.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth-certain consolidated financial
information of the Company and its subsidiaries for the five fiscal years ended
December 31, 2000. This data should be read in conjunction with the audited
consolidated historical financial statements of the Company and the notes
thereto included elsewhere herein.
Statement of Operations Data Year Ended December 31,
---------------------------------------------------------
1996 (1) 1997 (1) 1998 (1) 1999 (1) 2000 (1)
--------- --------- --------- --------- ---------
Total revenues $128,271 $122,367 $116,327 $103,431 $ 72,192
Costs and expenses:
Motel operating 67,344 62,333 60,608 53,856 31,598
Marketing and royalty fees 9,606 8,905 7,515 6,786 4,174
Corporate general and administrative 6,833 7,908 11,105 10,351 6,410
Lease expense 0 0 0 158 460
Vending expense 0 0 0 717 1,081
Impairment losses and restructuring costs 0 3,276 9,300 1,378 0
Depreciation and amortization(2) 13,995 14,985 17,995 14,978 15,059
--------- --------- --------- --------- ---------
Total direct expenses 97,778 97,407 106,523 88,224 58,782
--------- --------- --------- --------- ---------
Net operating income 30,493 24,960 9,804 15,207 13,410
Interest expense 31,573 31,373 30,578 30,070 25,555
--------- --------- --------- --------- ---------
Income (loss) from operations (1,080) (6,413) (20,774) (14,863) (12,145)
Net income (loss) 687 (3,372) 3,152 (7,675) (784)
Net income (loss) per share $ 0.86 $ (4.21) $ 3.94 $ (9.59) $ (0.98)
Other Financial Data
Net cash provided by (used in) operating activies $ 13,477 $ 15,947 $ 9,472 $(11,972) $ 2,550
Net cash provided by (used in) investing activies (50,498) (13,648) 26,998 4,248 9,855
Net cash provided by (used in) financing activities 35,371 (1,515) (29,921) (31,380) (12,596)
EBITDA(3) 44,487 43,221 37,099 31,563 28,469
EBITDA Margin (% of total revenues)(3) 34.70% 35.32% 31.89% 30.52% 39.44%
Net operating revenue margin (% of total revenues) 23.66% 20.40% 8.43% 14.70% 18.58%
Refurbishment of investment properties $ 9,857 $ 7,948 $ 5,696 $ 8,055 $ 4,641
Operating Data (4)
Number of motels 135 138 130 83 43
Number of rooms 11,317 11,385 10,254 6,753 3,706
Number of leased motels 0 0 5 43 75
REVPAR(5) $ 28.96 $ 29.48 $ 28.51 $ 29.86 $ 35.76
ADR(6) $ 40.91 $ 43.43 $ 43.51 $ 43.59 $ 48.97
Occupancy percentage(7) 66.25% 63.75% 61.46% 63.94% 67.51%
Balance Sheet Data
Total assets $368,433 $362,859 $339,055 $313,205 $287,683
Total debt 327,554 324,989 296,151 268,180 234,545
Total stockholders' equity 22,966 19,594 22,746 15,071 14,288
(1) Results for the year ended December 31, 1999 include the recovery of $0.5
million of offering costs previously written off. The results for years
ended December 31, 1996, 1997, 1998, 1999 and 2000 include a $2.6 million,
$1.1 million, $26.1 million, $2.6 million and $2.2 million of gains on the
sale of properties, respectively. Results for the year ended December 31,
1997 included the recording of restructuring costs and the impairment
losses of $3.3 million. Results for the year ended December 31, 1998
included the recording of impairment losses of $9.3 million. Results for
the year ended December 31, 1999 included the recording of restructuring
costs of $0.5 million and impairment losses of $0.9 million. Results form
operations for year ended December 31, 2000 include a $5.7 million gain net
of taxes on early extinguishment of debt.
(2) The Company changed its estimate of the economic benefit of certain
deferred loan costs in 1998. The effect of this change increased
amortization by $1.9 million for the year ended December 31, 1998.
(3) EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization, minority interest, gain on sale of properties,
write-off (recovery) of deferred offering costs, restructuring costs and
impairment losses and gain on early extinguishment of debt. EBITDA is not
intended to represent cash flow or any other measure of performance in
accordance with Accounting principles generally accepted in the United
States ("GAAP"). EBITDA is included herein because management believes that
certain investors find it to be a useful tool for measuring the ability to
service debt. EBITDA should not be construed by the reader as an
alternative to operating income (as determined in accordance with GAAP) as
an indicator of the Company's operating performance, or to cash flows from
operating activities (as determined in accordance with GAAP) as a measure
of liquidity.
(4) Operating data excludes amounts related to five motels, which are leased to
third party tenants at December 31, 1998, forty-three motels at December
31, 1999, and seventy-five motels at December 31, 2000.
(5) Revenue per available room ("REVPAR") represents motel-operating revenues
divided by the total number of rooms available. Total available rooms
represents the number of rooms available for rent multiplied by the number
of days in the reported period.
(6) The average daily room rate ("ADR") represents total room revenues divided
by the total number of rooms occupied.
(7) The occupancy percentage represents total rooms occupied divided by total
available rooms.
ITEM 7. 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 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 "SELECTED FINANCIAL DATA" AND THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED
ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL OPERATING RESULTS PRESENTED BELOW
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 HAVE BEEN PREPARED ON THE
SAME BASIS AS THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS.
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 percentages result in significant changes in
the operating profit of the Company's motels.
Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
audited 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
----------------------------------------------------------
Year Ended December 31
----------------------------------------------------------
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 $43,987 $42,908 $ 9,837 $47,474 $53,824 $ 90,382
Ancillary motel revenues 3,636 3,444 638 2,060 4,274 5,504
-------- -------- -------- -------- -------- ---------
Total motel operating revenues 47,623 46,352 10,475 49,534 58,098 95,886
Motel costs and expenses:
Motel operating expenses 23,429 22,148 8,169 31,708 31,598 53,856
Marketing and royalty fees 3,304 3,050 870 3,736 4,174 6,786
Depreciation and amortization 6,015 5,122 1,466 6,346 7,481 11,468
-------- -------- -------- -------- -------- ---------
Total motel direct expenses 32,748 30,320 10,505 41,790 43,253 72,110
-------- -------- -------- -------- -------- ---------
$14,875 $16,032 $ (30) $ 7,744 14,845 23,776
======== ======== ======== ========
Lease operations:
Lease revenues 10,142 2,477
Lease operating expenses 460 158
Depreciation and amortization 6,690 1,922
-------- ---------
2,992 397
Vending operations:
Vending revenues 1,072 948
Vending operating expenses 1,081 718
Depreciation and amortization 226 265
-------- ---------
(235) (35)
Corporate operations:
Other revenues 2,880 4,121
General and administrative expenses:
Management Operations 4,813 8,944
Construction/Acquisition and
Divestiture 975 907
Vending general and administrative expenses 622 500
-------- ---------
Total general and administrative expenses 6,410 10,351
Impairment losses and restructuring costs - 1,378
Depreciation and amortization 662 1,323
-------- ---------
(4,192) (8,931)
-------- ---------
Net operating income $13,410 $ 15,207
======== =========
Other data:
Number of motels at year end (5) 42 42 1 41 43 83
Number of rooms at year end (5) 3,636 3,642 70 3,111 3,706 6,753
Occupancy percentage (5) 67.46% 67.85% 69.93% 55.32% 67.51% 63.94%
ADR (1) (5) $ 48.93 $ 47.53 $ 51.10 $ 40.55 $ 48.97 $ 43.59
REVPAR (2) (5) $ 35.74 $ 34.83 $ 36.93 $ 25.90 $ 35.76 $ 29.57
Net operating income margin (3) 18.58% 14.70%
Net motel revenue margin (4) (5) 47.49% 49.30% 34.80% 29.68% 41.48% 38.99%
--------------------------------------------
(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, vending revenues
and 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 December 31, 1999 and 2000 and for the years then ended, excludes
amounts related to forty-three motels and seventy-five motels,
respectively, 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, fax machine use and from vending machines commissions. Lease revenues are
derived from lease payments from properties operated by third party tenants.
Vending revenues are generated by vending operations located within the Company
owned locations as well as non-owned Company locations. Other revenues include
interest income, distributions on partnership interests in excess of the
Company's basis in such partnerships and other miscellaneous income. Total
revenues decreased to $72,192,000 in 2000 from $103,431,000 in 1999, a decrease
of $31,239,000 or 30.2%.
Motel revenues decreased to $58,098,000 in 2000 from $95,886,000 in
1999 a decrease of $37,788,000 or 39.4%. The decrease of $37,788,000 in motel
revenues was attributable to the acquired or divested motels (including those
subject to operating leases) since January 1, 2000 and offset by an increase in
the motel revenues for motels owned during both periods of $1,271,000. Motel
revenues for motels owned during both periods increased 2.7%. The increase in
motel revenues for motels owned during both periods was principally attributable
to an increase in the average daily room rate ("ADR"). The ADR for the motels
owned during both periods increased to $48.93 in 2000 from $47.53 in 1999, an
increase of $1.40 or 2.9%. The occupancy percentage in 2000 for the motels owned
during both periods decreased to 67.5% from 67.9% in 1999 or 0.6%. Revenue per
available room ("REVPAR") for motels owned during both periods increased to
$35.74 in 2000 from $34.83 in 1999, an increase of $0.91 or 2.6%. The acquired
and divested motels had an occupancy percentage of 69.9%, an ADR of $51.10 and a
REVPAR of $36.93 for the period which the Company owned them in 2000.
Motel operating expenses include payroll and related costs,
utilities, repairs and maintenance, property taxes, linens and other operating
supplies. Motel operating expenses decreased to $31,598,000 in 2000 from
$53,856,000 in 1999 a net decrease of $22,258,000 or 41.3%. Approximately
$23,539,000 of the decrease is attributable to the cost of operating the
acquired and divested motels since January 1, 2000. The cost of operating motels
owned during both periods increased to $23,429,000 in 2000 from $22,148,000 in
1999, an increase of $1,281,000 or 5.8%. Motel operating expenses as a
percentage of motel revenues decreased to 54.4% in 2000 from 56.2% in 1999.
Motel operating expenses as a percentage of motel revenues for the motels owned
in both periods increased to 49.2% in 2000 from 47.8% in 1999. The increase in
the operating expenses as a percentage of motel revenues for motels owned during
both periods is primarily attributable to an increase in labor costs and repair
and maintenance expenses that on a percentage basis exceed the percentage
increase in motel revenues. Motel operating expenses as a percent of motel
revenues for the acquired and divested motels was 78.0% in 2000.
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 $4,174,000 in 2000 from $6,786,000 in 1999, a decrease of
$2,612,000 or 38.5%. Approximately $2,866,000 of the decrease in marketing and
royalty fees was attributable to the motels acquired and divested since January
1, 1999. The marketing and royalty fees for motels owned during both periods
increased to $3,304,000 in 2000 from $3,050,000 in 1999, an increase of $254,000
or 8.3%. For the motels owned during both periods, marketing and royalty fees as
a percent of room revenues increased to 7.5% in 2000 from 7.1% in 1999. The
increase in marketing and royalty fees for motels owned both periods in 1999 and
2000 was principally due to additional marketing efforts.
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 expenses. 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
$4,131,000 to $4,813,000 in 2000 from $8,944,000 in 1999, a decrease of 46.2%.
Salary and related costs account for $1,587,000 of the decrease as a result of
the restructuring efforts, which occurred, in the fourth quarter 1999. There was
also a decrease of $1,951,000 resulting in the conclusion of the Sholodge
litigation agreement in 1999. The general and administrative expenses associated
with Construction/Acquisition and Divestiture Division increased $68,000 from
$907,000 in 1999 to $975,000 in 2000 or 7.5%. The increase is attributable
principally to bonuses for the sales and leasing of the Company's properties to
others. Vending general and administrative expenses increased $122,000 from
$500,000 in 1999 to $622,000 in 2000. As a percentage of total motel operating
revenues, Management Operations general and administrative expenses decreased
from 9.3% in 1999 to 8.3% in 2000.
Lease revenues increased to $10,142,000 in 2000 from $2,477,000 in
1999, an increase of $7,665,000. This increase is the result of leasing an
additional thirty-two properties since December 31, 1999.
Lease expenses increased to $460,000 in 2000 from $158,000 in 1999,
an increase of $302,000. Lease expenses primarily consist of cost expended for
property insurance.
Vending revenues increased $124,000 from $948,000 in 1999 to
$1,072,000 in 2000 or an increase of 13.1%. Vending revenue is generated by
vending machines and coffee services supplied to Company owned locations as well
as non-owned Company locations.
Vending expenses increased $1,081,000 in 2000 from $718,000 in 1999
an increase of $363,000 or 50.6%. Vending expenses consist mostly of cost of
goods sold and salaries related to maintain the vending routes.
Impairment losses and restructuring costs in the amount of $1,378,000
were recorded in 1999. Based on a property-by-property review of certain
properties that had experienced a deterioration in operating performance,
management determined that in certain instances the decline in operating
performance was due to factors outside of management's control and likely to
persist for the foreseeable future. The Company believes it is unlikely to
realize the carrying value of certain of its properties through either a sale or
from operations and accordingly an impairment loss in the amount of $928,000 was
recorded in 1999. Restructuring costs of $450,000 were recorded in the fourth
quarter of 1999 relating to the reorganization of the Company's corporate and
regional offices. This reorganization was necessitated as the result of the
substantial leasing and sales activities throughout 1999. The provision for
restructuring costs is intended to cover the severance costs.
Depreciation and amortization increased from $14,978,000 in 1999 to
$15,059,000 in 2000, an increase of $81,000 or 0.6%.
Net operating income decreased from $15,207,000 in 1999 to
$13,410,000 in 2000, a decrease of $1,797,000 or 11.8%. The decrease in net
operating revenues included a decrease of $13,016,000 in net motel revenues
(motel revenues less motel operating expenses and marketing and royalty fees).
Of the $13,016,000 decrease in net motel revenues, $12,654,000 resulted from the
motels acquired and divested since January 1, 1999 and a decrease in net motel
revenues for motels owned during both periods of $362,000 or 1.7%. Net operating
revenue as a percent of total revenues was 18.6% and 14.7% in 2000 and 1999,
respectively. The decrease in net operating income also included the decrease in
general and administrative expenses of $4,095,000, and an increase in
depreciation and amortization of $81,000 and a decrease in restructuring costs
and impairment losses of $1,378,000 all of which are separately discussed above.
In addition to the above, the Company realized an decrease in other revenues in
the amount of $1,241,000 due principally to a gain on the repurchase of
outstanding bonds offset by accelerated amortization and interest expense
associated with bond purchase transaction in 1999. The Company also realized an
increase in net lease operations of $2,595,000 and a decrease in vending
operations of $200,000.
Interest expense decreased from $30,070,000 in 1999 to $25,555,000 in
2000, a decrease of $4,515,000. The decrease is principally due to a decrease in
average outstanding borrowings, specifically a decrease in the 12% Senior
Subordinated Debt.
Gain on sale of properties amounted to $2,528,000 in 1999 as compared
to $2,177,000 in 2000. The gain in 1999 consisted of $2,528,000 from the sale of
ten motel properties compared with the sale of eight motel properties sold in
2000.
Net income (loss) decreased $6,891,000 to a net loss of $784,000 in
2000 from a net loss of $7,675,000 in 1999. Included in the net decrease is the
gain for early extinguishment of debt on the 12% Senior Subordinated debt of
$5,653,000 net of tax of $3,602,000.
Extraordinary item gain of $5.6 million is the result of the
repurchase of $31.4 million of 12% Senior Subordinated Notes at a discount.
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
audited consolidated financial statements presented elsewhere herein.
(certain of the 1999 numbers and 1998 numbers have been reclassified to
conform to the 2000 presentation):
Supplemental Operating Results and Statistics
-----------------------------------------------------------
Year Ended December 31
-----------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
----------------- ------------------ --------------------
1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- --------- ---------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $67,990 $66,202 $22,392 $41,639 $ 90,382 $107,841
Ancillary motel revenues 4,465 3,840 1,039 2,564 5,504 6,404
-------- -------- -------- -------- --------- ---------
Total motel operating revenues 72,455 70,042 23,431 44,203 95,886 114,245
Motel costs and expenses:
Motel operating expenses 37,345 33,741 16,511 26,867 53,856 60,172
Marketing and royalty fees 5,073 4,539 1,713 2,976 6,786 7,515
Depreciation and amortization 7,603 11,258 3,865 3,317 11,468 14,575
-------- -------- -------- -------- --------- ---------
Total motel direct expenses 50,021 49,538 22,089 33,160 72,110 82,262
-------- -------- -------- -------- --------- ---------
$22,434 $20,504 $ 1,342 $11,043 23,776 31,983
======== ======== ======== ========
Lease operations:
Lease revenues 2,477 -
Lease operating expenses 158 -
Depreciation and amortization 1,922 -
--------- ---------
397 -
Vending operations:
Vending revenues 948 762
Vending operating expenses 718 436
Depreciation and amortization 265 170
--------- ---------
(35) 156
Corporate operations:
Other revenues 4,121 1,319
General and administrative expenses:
Management Operations 8,944 9,716
Construction/Acquisition and
Divestiture 907 846
Vending general and administrative expenses 500 543
--------- ---------
Total general and administrative expenses 10,351 11,105
Impairment losses and restructuring costs 1,378 9,300
Depreciation and amortization 1,323 3,250
--------- ---------
(8,931) (22,336)
--------- ---------
Net operating income $ 15,207 $ 9,803
========= =========
Other data:
Number of motels at year end (5) 77 77 6 53 83 130
Number of rooms at year end (5) 6,358 8,657 395 1,597 6,753 10,254
Occupancy percentage (5) 64.98% 63.29% 61.32% 58.96% 63.94% 61.46%
ADR (1) (5) $ 45.03 $ 44.96 $ 39.73 $ 41.38 $ 43.59 $ 43.51
REVPAR (2) (5) $ 31.18 $ 30.10 $ 25.49 $ 25.90 $ 29.57 $ 28.32
Net operating income margin (3) 14.70% 8.43%
Net motel revenue margin (4) (5) 44.18% 47.98% 23.25% 34.49% 38.99% 43.17%
--------------------------------------------
(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 corporate other and lease 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 December 31, 1998 and 1999 and for the years then ended, excludes
amounts related to five motels and forty-three motels, respectively,
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, fax machine use and from vending machines commissions.
Lease revenues are derived from lease payments from properties operated by third
party tenants. Vending revenues are generated by vending machine and coffee
service sales at both Company owned and non-Company owned locations. Other
revenues include interest income, distributions on partnership interests in
excess of the Company's basis in such partnerships and other miscellaneous
income. Total revenues decreased to $103,431,000 in 1999 from $116,326,000 in
1998, a decrease of $12,896,000 or 11.1%.
Motel revenues decreased to $95,886,000 in 1999 from $114,245,000 in
1998 a decrease of $18,359,000 or 16.1%. The decrease of $18,359,000 in motel
revenues was attributable to the acquired or divested motels (including those
subject to operating leases) since January 1, 1999 and offset by an increase in
the motel revenues for motels owned during both periods of $2,413,000. Motel
revenues for motels owned during both periods increased 3.4%. The increase in
motel revenues for motels owned during both periods was principally attributable
to increases in the occupancy percentage and the average daily room rate
("ADR"). The ADR for the motels owned during both periods increased to $45.03 in
1999 from $44.96 in 1998, an increase of $0.07 or 0.2%. The occupancy percentage
in 1999 for the motels owned during both periods increased to 65.0% from 63.3%
in 1998 or 1.7%. Revenue per available room ("REVPAR") for motels owned during
both periods increased to $31.18 in 1999 from $30.10 in 1998, an increase of
$1.08 or 3.6%. The acquired and divested motels had an occupancy percentage of
61.3%, an ADR of $39.73 and a REVPAR of $25.49 for the period, which the Company
owned them in 1999.
Motel operating expenses include payroll and related costs,
utilities, repairs and maintenance, property taxes, linens and other operating
supplies. Motel operating expenses decreased to $53,856,000 in 1999 from
$60,172,000 in 1998 a net decrease of $6,316,000 or 10.5%. Approximately
$10,356,000 of the decrease is attributable to the cost of operating the
acquired and divested motels since January 1, 1999. The cost of operating motels
owned during both periods increased to $37,345,000 in 1999 from $33,741,000 in
1998, an increase of $3,604,000 or 10.7%. Motel operating expenses as a
percentage of motel revenues increased to 56.2% in 1999 from 52.7% in 1998.
Motel operating expenses as a percentage of motel revenues for the motels owned
in both periods increased to 51.5% in 1999 from 48.2% in 1998. The increase in
the operating expenses as a percentage of motel revenues for motels owned during
both periods is primarily attributable to an increase in labor costs and repair
and maintenance expenses that on a percentage basis exceed the percentage
increase in motel revenues. Motel operating expenses as a percent of motel
revenues for the acquired and divested motels was 70.5% in 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 $6,786,000 in 1999 from $7,515,000 in 1998, a decrease of $729,000
or 9.7%. Approximately $1,263,000 of the decrease in marketing and royalty fees
was attributable to the motels acquired and divested since January 1, 1998. The
marketing and royalty fees for motels owned during both periods increased to
$5,073,000 in 1999 from $4,539,000 in 1998, an increase of $534,000 or 11.8%.
For the motels owned during both periods, marketing and royalty fees as a
percent of room revenues increased to 7.5% in 1999 from 6.9% in 1998. The
increase in marketing and royalty fees for motels owned in 1998 and 1999 was
principally due to additional marketing efforts to increase the occupancy
percentage. Including the affiliation of certain properties with national brands
resulting in the payment of franchise fees on such properties in 1999 where no
such fees were incurred in 1998.
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 expenses. 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
$772,000 to $8,944,000 in 1999 from $9,716,000 in 1998, a decrease of 7.9%.
Salary and related costs account for the majority of the remaining overall
decrease. The general and administrative expenses associated with
Construction/Acquisition and Divestiture Division increased $61,000 from
$846,000 in 1998 to $907,000 in 1999 or 7.2%. The increase is attributable
principally to an increase in the sales and leasing of the Company's properties
to others. Vending General and Administrative expenses decreased $43,000 from
$543,000 in 1998 to $500,000 in 1999. As a percentage of total motel operating
revenues, Management Operations general and administrative expenses increased
from 8.5% in 1998 to 9.3% in 1999.
Lease revenues increased to $2,477,000 in 1999 from $0 in 1998, an
increase of $2,477,000 or 100.0%. This increase is the result of the forty-three
leased properties as of December 31, 1999.
Vending revenues increased to $948,000 in 1999 from $762,000 in 1998,
an increase of $186,000 or 24.4%. This increase is the result of new accounts
being brought on line.
Impairment losses and restructuring costs in the amount of $1,378,000
and $9,300,000 were recorded in 1999 and 1998, respectively. Based on a
property-by-property review of certain properties that had experienced a
deterioration in operating performance, management determined that in certain
instances the decline in operating performance was due to factors outside of
management's control and likely to persist for the foreseeable future. The
Company believes it is unlikely to realize the carrying value of certain of its
properties through either a sale or from operations and accordingly an
impairment loss in the amount of $928,000 was recorded in 1999 and $9,300,000 in
1998. Restructuring costs of $450,000 were recorded in the fourth quarter of
1999 relating to the reorganization of the Company's corporate and regional
offices. This reorganization was necessitated as the result of the substantial
leasing and sales activities throughout 1999. The provision for restructuring
costs is intended to cover the severance costs.
Depreciation and amortization decreased to $14,978,000 in 1999 from
$17,995,000 in 1998, a decrease of $3,017,000 or 16.8%. The $3,017,000 decrease
consists of a $1,832,000 decrease in corporate operations plus a $3,107,000
decrease from motel operations offset by an increase of $1,922,000 for lease
operations. During 1998, the Company reevaluated the economic useful life of
certain deferred loan costs associated with the CS First Boston $150.0 million
loan facility in light of the Company's under utilization of such facility. As a
result, the Company accelerated the amortization of such deferred loan costs in
the amount of $1.9 million in 1998.
Net operating income increased to $15,207,000 in 1999 from $9,803,000
in 1998, an increase of $5,404,000 or 55.1%. The increase in net operating
revenues included a decrease of $11,410,000 in net motel revenues (motel
revenues less motel operating expenses and marketing and royalty fees). Of the
$11,410,000 decrease in net motel revenues, $9,151,000 resulted from the motels
acquired and divested since January 1, 1998 and a decrease in net motel revenues
for motels owned during both periods of $2,259,000 or 7.0%. Net operating
revenue as a percent of total revenues was 14.7% and 8.4% in 1999 and 1998,
respectively. The increase in net operating income also included the decrease in
general and administrative expenses of $754,000, and decrease in depreciation
and amortization of $3,017,000 and an decrease in restructuring costs and
impairment losses of $7,922,000 all of which are separately discussed above. In
addition to the above, the Company realized an increase in other revenues in the
amount of $2,802,000 due principally to a gain on the repurchase of outstanding
bonds offset by accelerated amortization and interest expense associated with
bond purchase transaction. The Company also realized an increase in net lease
operations of $397,000.
Interest expense decreased to $30,070,000 in 1999 from $30,578,000 in
1998, a decrease of $508,000. The decrease is principally due to a decrease in
average outstanding borrowings.
Gain on sale of properties amounted to $2,528,000 in 1999 as compared
to $26,079,000 in 1998. The gain in 1999 consisted of $2,528,000 from the sale
of ten motel properties.
Net income (loss) decreased $10,827,000 to a net loss of $7,675,000
in 1999 from net income of $3,152,000 in 1998. Included in the net decrease of
$10,827,000 is a decrease of $14,172,000 of net of tax gains realized on the
sale of properties. Also included in the $10,827,000 decrease in net income is
the decrease in the provision for restructuring costs and impairment losses of
$829,000 and $5,596,000 net of tax for 1999 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses of its capital resources include debt
service, capital expenditures (primarily for motel refurbishment) 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. As of
December 31, 2000, the Company has principal repayment obligations of
$28,206,000, $17,581,000 and $7,739,000 for the years ending December 31, 2001,
2002 and 2003, respectively. In January 2000, the Company borrowed $1.7 million
at prime plus .5% with monthly principal payments of $212,500 due October 25,
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 $3.7 million.
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. In
October 2000, the Company repurchased an additional $20.9 million of the 12%
Senior Subordinated Notes from an affiliate for a pre-tax gain of $6.6 million.
As part of the transaction the Company assumed loans in the amount of $2.0
million with an annual interest rate of 12% due April 14, 2004, $0.6 million
with an annual interest rate of 12% due April 14, 2004 and $1.1 million with an
annual interest rate of 12% due December 22, 2001. The Company also recorded a
$2.6 million adjustment to income taxes payable to the parent as part of this
transaction. In November 2000, the Company refinanced an existing loan for
$3,000,000 at 9% with monthly principal and interest payments of $26,992 due in
ten years, secured by one property in Milford, Massachusetts. In November 2000,
the Company refinanced an existing loan for $4,500,000 at 13.5% due in twelve
months. Subsequent to December 31, 2000 the Company obtained loans in the
amounts of $3.5 million and $7.0 million for two properties under construction.
The Company believes it has or will be able to obtain adequate
resources to meet its near-term maturing debt and other obligations, either from
operating cash flows or refinancing, including the maturity of the remaining
$13.5 million 12% Senior Subordinated Notes in 2004.
The Company's capital expenditure requirements principally include
capital improvements and the refurbishment of lodging facilities as part of an
ongoing strategy to provide well-maintained facilities. The Company made capital
expenditures (exclusive of acquisitions and development of investment
properties) of $4,641,000, $8,055,000, and $5,696,000 in 2000, 1999 and 1998,
respectively. In addition, as of December 31, 2000, the Company has $786,000 of
cash restricted for future refurbishment, 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 year
ended December 31, 2000 cash and cash equivalents decreased $192,000 from
$4,421,000 at December 31, 1999 to $4,230,000 at December 31, 2000. A total of
$5,609,000 of cash was used in operating activities, $9,855,000 of cash was
provided by investing activities and $4,437,000 of cash was used in financing
activities. Net investing activities include: $4,239,000 of cash utilized for
motel development; $4,641,000 expended on renovation of existing motel
properties; $476,000 of cash was provided by a decrease in cash restricted for
refurbishment of properties; and $18,259,000 of cash provided from the sale of
investment properties and collections on mortgage and other notes receivable.
Cash used by financing activities include: $26,478,000 of cash utilized to repay
indebtedness plus $1,012,000 of deferred financing costs less $23,219,000 of
proceeds from borrowings.
The Company is not currently a party to any proceeding which, in
management's opinion, is likely to have a material adverse effect on the
Company's operating results or financial position.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2000, the Company has total outstanding debt of
approximately $234,212,000 of which approximately $42,086,000, or 18%, is
variable rate debt. If market rates of interest on the Company's debt increase
by 10%, the increase in interest expense on the Company's variable rate debt
would decrease future earnings and cash flows by approximately $647,000. If
market rates of interest increased by 10%, the fair value of the Company's total
outstanding debt would decrease by approximately $7,618,000. If market rates of
interest on the Company's variable rate debt decreased by 10%, the decrease in
interest expense on the Company's variable rate debt would increase future
earnings and cash flows by approximately $194,000. If market rates of interest
decreased by 10%, the fair value of the Company's total outstanding debt would
increase by approximately $4,996,000.
These amounts were determined by considering the impact of
hypothetical interest rates on the Company's debt. These analyses do not
consider the effect of the reduced level of overall economic activity that could
exist in such an environment. Further, in the event of a change of such
magnitude, management would likely take actions to mitigate its exposure to such
a change.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements in this Form 10-K.
The supplemental financial information specified by Item 302 of
Regulation S-K is not applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following chart lists the Company's current directors and executive
officers.
Name Age Positions(s) with the Company
- ---- --- -----------------------------
Paul F. Wallace 64 Director, Chairman and Chief Executive Officer
Kurt M. Mueller 44 Director, President and Chief Financial Officer
Carl W. Desch 85 Director
Alan H. Baerenklau 55 Director
Ronald P. Stewart 57 Director
Peter W. McClean 57 Director
Philip J. Levien 56 Director
Blane P. Evans 41 Vice President, Secretary & Treasurer
Herbert Gould 72 Director
The following is a biographical summary of the experience of the
directors and executive officers of the Company:
Paul F. Wallace, formerly a Director and controlling stockholder of
EconoLodge, has been Chairman and Chief Executive Officer of the Company since
January 1994 and a Director of the Company since August 1992. Mr. Wallace also
serves on the Company's operations committee. Mr. Wallace was President of The
Broadstone Group from July 1978 until June of 1986, and he became the President
again in July of 1993. Mr. Wallace has been Chairman of the Board and
controlling stockholder of The Broadstone Group since July 1981, and is
currently the principal shareholder of a privately held manufacturing company
and an investor in and operator of various real estate related projects.
Kurt M. Mueller has been the Chief Financial Officer since April
1997. Mr. Mueller has been a Director of the Company since he joined MOA in May
1991. Mr. Mueller was President from January 1994 until April 1997 and Chief
Operating Officer of the Company from May 1991 until April 1997. Mr. Mueller
also served as Executive Vice President from May 1991 until January 1994. In
addition, Mr. Mueller currently serves on the Company's operations committee.
From 1978 to 1991, Mr. Mueller was employed by Ernst & Young LLP most recently
as a Senior Manager. During his career at Ernst & Young LLP, he was on the audit
staff and, during his last two years, he worked in the Mergers and Acquisitions
Group performing due diligence financial and operational reviews.
Carl W. Desch, formerly a Director of EconoLodge, has been a Director
of the Company since April 1993 and serves on the Company's audit committee and
operations committee. Mr. Desch has been Chairman and Director of Citibank
(NY State), N.A. for over five years.
Alan H. Baerenklau joined the Company in March 1997 and became a
Director, President and Chief Operating Officer of the Company in April 1997.
Mr. Baerenklau was President and Chief Operating Officer of Florida Hospitality
Group, a hotel development and management company, from 1984 to 1997. Prior to
1984, Mr. Baerenklau held various positions with the Howard Johnson Company
including those of General Manager, Regional Manager, Director of Corporate Real
Estate and Vice President of Operations. He is also an investor, partner and
officer in various hotel real estate ventures. Mr. Baerenklau retired as the
President of the company in September 2000 and remains with the company as a
Director.
Louis A. Scarrone, M.D., formerly a Director of EconoLodge, has been
a Director of the Company since October 1993. He has been engaged in his own
private practice of internal medicine since 1955.
Ronald P. Stewart, formerly a Director of EconoLodge, has been a
Director of the Company since October 1993. Mr. Stewart has been Headmaster of
York Preparatory School in New York City since 1969 and Chairman of The Rhodes
Group, Inc. since 1992.
Peter W. McClean, has been a Director of the Company since April
1997. Mr. McClean is currently Senior Vice President and Head of Global Risk
Management for the Bank of Bermuda Limited, based in Hamilton, Bermuda. In his
current position, Mr. McClean is responsible for the credit policy, the market
risk policy, the operating risk, the internal audit and the Bank's General
Counsel.
Philip J Levien, formerly a Director and Chairman of the Board of
EconoLodge, has been a Director of the Company since April 1997 and serves on
its audit committee. Mr. Levien has served as a Director of the Broadstone
Group for the past 15 years. Mr. Levien has been a Real Estate Developer for
the past 30 years.
Blane P. Evans has been Vice President, Secretary and Treasurer of
the Company since May 1999. Mr. Evans joined the Company in January 1992 and
has served in various capacities, most recently as Corporate Controller.
Herbert Gould, was elected to the Board of Directors in 2000.
Dr. Gould is a Medical Consultant in the field of opthamology and a
Professor of Opthamological Medicine at New York Medical College.
Executive officers of the Company are appointed and serve at the
discretion of the Board of Directors. Each director of the Company is elected
for a period of one year and serves until his successor is duly elected and
qualified. None of the directors or executive officers of the Company has a
family relationship with any of the other directors or executive officers of the
Company.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by
the Company to each of the Chief Executive Officer and the four other most
highly compensated executive officers of the Company, as of the end of the last
fiscal year, for services rendered to the Company in all capacities during the
last three fiscal years:
SUMMARY COMPENSATION TABLE
Name and Principal Position Year Salary($) Bonus($)
- --------------------------- ---- --------- --------
Paul F. Wallace 2000 300,000 -
Chairman and Chief Executive Officer 1999 300,000 -
1998 300,000 -
Alan H. Baerenklau 2000 176,664 -
President and Chief Operating Officer (1) 1999 233,300 -
1998 233,300 116,700
Kurt M. Mueller 2000 200,000 -
President and Chief Financial Officer 1999 200,000 -
1998 200,000 50,000
- -----------------------------
(1) Mr. Baerenklau joined the Company in March 1997 as President and Chief
Operating Officer and retired in September 2000.
The Company historically has and intends to continue to pay
discretionary bonuses to key employees, including property managers, as rewards
for superior financial performance. The Company does not maintain any employee
pension, profit sharing or savings plans for its employees, other than a 401(k)
savings plan, nor does it currently have any stock related plans for key
executives.
Members of the Board of Directors do not receive compensation for
serving on the Board except that Messrs. Desch, Baerenklau, Stewart, McClean,
Levien and Gould each receive a $5,000 annual retainer and are paid $1,000 for
each meeting. All members of the Board of Directors receive reimbursement of
reasonable expenses incidental to attendance at meetings of the Board of
Directors and all committees.
Compensation Committee Interlocks and Insider Participation
The Company has no compensation committee of the Board of Directors.
During 2000, no officer or employee of the Company or its subsidiaries
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned by the only entity known to be the beneficial owner of more
than 5% of the Company's Common Stock, by each director and by all directors and
officers of the Company as a group as of April 30, 2001:
Shares of Common Stock
Name and Address of Beneficial Owner Beneficially Owned Percent of Class
- ------------------------------------ ---------------------- ----------------
Principal Stockholders:
New Image Realty, Inc. 677,228 85%
888 Seventh Avenue
Suite 3400
New York, NY 10106
Executive Officer and Directors
- -------------------------------
Paul F. Wallace 684,357 (1) 86%
All Directors and Officers
as a Group (11 persons) 684,357 (2) 86%
- -------------------------
(1) Mr. Wallace is President, Chairman of the Board and controlling
stockholder of The Broadstone Group. The Broadstone Group owns 100% of the
outstanding Common Stock of New Image Realty, Inc. ("New Image"), which owns
85% of the outstanding Common Stock of MOA. Mr. Wallace is deemed to be a
beneficial owner of 677,228 shares of Common Stock of the Company owned by
New Image and 7,129 shares of Common Stock of the Company issued to Opal
Inc. in January 1994.
(2) Includes 677,228 shares of Common Stock of the Company held by New Image and
7,129 shares of Common Stock of the Company held by Opal Inc. that are
deemed to be beneficially owned by Paul F. Wallace.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a member of an affiliated group that files a
consolidated tax return for federal income tax purposes.
In March 2000, the Company purchased from an affiliated company $10.5
million of the 12% Senior Subordinated Notes due in 2004 for a gain of $4.2
million which is offset by $.5 million in accelerated deferred financing costs
written off as part of the transaction. In October 2000, the Company purchased
an additional $20.9 million of the 12% Senior Subordinated Notes for a gain of
approximately $6.7 million which is partially offset by $0.2 million in
accelerated deferred financing costs written off as part of this transaction.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1 & 2. Financial Statements and Schedules
See Index to Financial Statements in this Form 10-K.
3. Exhibits - None
(b) Reports on Form 8-K - None
INDEX TO FINANCIAL STATEMENTS
MOA HOSPITALITY, INC. AND SUBSIDIARIES
Years Ended December 31, 2000, 1999 and 1998
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-3
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 2000 F-4
Consolidated Statements of Changes in Stockholders' Equity for
each of the three years in the period ended December 31, 2000 F-5
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2000 F-6
Notes to Consolidated Financial Statements F-7
All schedules have been omitted because they are not required or are
not applicable, or the required information is included in the
financial statements or notes thereto.
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
MOA Hospitality, Inc.
We have audited the consolidated balance sheets of MOA Hospitality, Inc.
and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MOA
Hospitality, Inc. and Subsidiaries at December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
April 20, 2001
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------------
2000 1999
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,230,268 $ 4,421,943
Accounts receivable from property operations 1,536,929 1,813,599
Operating supplies and prepaid expenses 2,031,740 1,969,246
Current portion of mortgage and notes receivable 6,185,463 1,608,050
-------------- --------------
Total Current Assets 13,984,400 9,812,838
Investment property:
Operating properties, net of accumulated depreciation 232,366,362 256,609,273
Land held for development 8,365,949 4,937,586
-------------- --------------
Total investment property 240,732,311 261,546,859
Other Assets:
Deposits and other assets 1,023,563 3,680,946
Restricted cash 1,375,053 1,850,745
Mortgage and other notes receivable, less current portion 19,402,847 23,448,186
Financing and other deferred costs,
net of accumulated amortization of $14,412,947
in 2000 and $10,925,133 in 1999 11,164,445 12,865,533
-------------- --------------
Total Other Assets 32,965,908 41,845,410
-------------- --------------
Total Assets $ 287,682,619 $ 313,205,107
============== ==============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,109,241 $ 1,714,191
Real estate taxes payable 1,373,133 2,017,579
Accrued interest payable 2,002,850 2,712,913
Other liabilities, including nonrefundable lease
deposits of $19,597,132 in 2000 and
$9,776,573 in 1999 24,432,126 11,500,853
Other accounts payable and accrued expenses 6,923,704 10,194,388
Current portion of long-term debt 28,518,916 13,153,969
-------------- --------------
Total Current Liabilities 64,359,970 41,293,893
Net deferred tax liability 995,018 104,798
Long-term debt, less current portion:
Mortgage and other notes payable 192,901,582 211,525,324
12% Senior Subordinated Notes, net of unamortized
discount of $351,205 in 2000 and $1,400,961 in 1999 13,124,795 43,501,040
-------------- --------------
Total Long-term debt, excluding current portion 206,026,377 255,026,364
-------------- --------------
Total Liabilities 271,381,365 296,425,055
-------------- --------------
Minority Interests 2,013,721 1,708,579
Stockholders' equity:
Common stock, $.01 par value, 1,500,000 shares
authorized; 800,000 shares issued and outstanding 8,000 8,000
Additional paid-in capital 15,294,284 15,294,284
Retained deficit (1,014,751) (230,811)
-------------- --------------
Total stockholders' equity 14,287,533 15,071,473
-------------- --------------
Total Liabilities and Stockholders' Equity $ 287,682,619 $ 313,205,107
============== ==============
See accompanying notes to consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------------
2000 1999 1998
--------------- ---------------- ---------------
Revenues:
Motel operating revenues $ 58,097,785 $ 95,885,655 $ 114,245,185
Lease revenues, net of deferred purchase price 10,142,487 2,476,570 -
credit of $1,974,766 in 2000 and $299,336 in 1999
Vending revenues 1,071,916 947,636 762,182
Other revenues 2,879,897 4,121,228 1,319,407
--------------- ---------------- ---------------
Total revenues 72,192,085 103,431,089 116,326,774
Costs and expenses:
Motel operating expenses 31,597,842 53,855,617 60,171,598
Marketing and royalty fees 4,174,102 6,785,937 7,515,048
General and administrative 6,410,684 10,350,626 11,104,660
Lease expense 460,028 157,729 -
Vending expense 1,080,673 717,906 436,615
Impairment losses and restructuring costs - 1,378,000 9,300,000
Depreciation and amortization 15,059,018 14,978,458 17,995,330
--------------- ---------------- ---------------
Total direct expenses 58,782,347 88,224,273 106,523,251
--------------- ---------------- ---------------
Net operating income 13,409,738 15,206,816 9,803,523
Interest expense 25,554,837 30,069,919 30,578,266
--------------- ---------------- ---------------
Loss from operations (12,145,099) (14,863,103) (20,774,743)
Minority interests (472,095) (19,575) (83,641)
Gain on sale of properties 2,176,991 2,527,605 26,078,852
--------------- ---------------- ---------------
Income (loss) before income taxes (10,440,203) (12,355,073) 5,220,468
Income tax expense (benefit) (4,002,914) (4,680,555) 2,068,563
--------------- ---------------- ---------------
Income (loss) before extraordinary item (6,437,289) (7,674,518) 3,151,905
Extraordinary item:
Gain on early extinguishment of debt, net of
income taxes of $3,602,298 5,653,349 - -
--------------- ---------------- ---------------
Net Income (Loss) $ (783,940) $ (7,674,518) $ 3,151,905
=============== ================ ===============
Net income (loss) per common share (basic and diluted):
Income (loss) before extraordinary item (8.05) (9.59) 3.94
Extraordinary item 7.07 - -
--------------- ---------------- ---------------
Net income (loss) per common share (basic and diluted) $ (0.98) $ (9.59) $ 3.94
=============== ================ ===============
Weighted average number of
common shares outstanding 800,000 800,000 800,000
=============== ================ ===============
See accompanying notes to consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Additional Retained Total
Common Paid-In Earnings Stockholders'
Stock Capital (Deficit) Equity
---------- --------------- -------------- ----------------
Balance at January 1, 1998 $ 8,000 $ 15,294,284 $ 4,291,802 $ 19,594,086
Net income - - 3,151,905 3,151,905
---------- --------------- -------------- ----------------
Balance at December 31, 1998 8,000 15,294,284 7,443,707 22,745,991
Net loss - - (7,674,518) (7,674,518)
---------- --------------- -------------- ----------------
Balance at December 31, 1999 8,000 15,294,284 (230,811) 15,071,473
Net loss - - (783,940) (783,940)
---------- --------------- -------------- ----------------
Balance at December 31, 2000 $ 8,000 $ 15,294,284 $ (1,014,751) $ 14,287,533
========== =============== ============== ================
See accompanying notes to consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------------
2000 1999 1998
--------------- -------------- --------------
Cash flows provided by (used in) operating activities:
Net income (loss) $ (783,940) $ (7,674,518) $ 3,151,905
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, amortization and accretion
of discount on notes 15,226,451 16,472,044 18,390,661
Impairment losses - 928,000 9,300,000
Minority interests of others in income from operations 472,095 19,575 83,641
Deferred income taxes 890,220 1,646,848 (4,893,734)
Gain on early extinguishment of debt (9,255,647) - -
Gain on sale of properties (2,176,991) (2,527,605) (26,078,853)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 276,670 197,786 219,529
Operating supplies, prepaid expenses,
deposits and other assets 1,047,821 (4,405,249) 3,987,946
Increase (decrease) in liabilities:
Non-refundable security deposits 9,820,559 9,049,336 -
Accounts payable and accrued expenses (12,257,400) (1,065,080) 5,553,702
Accrued interest payable (710,063) (669,401) (242,495)
--------------- -------------- --------------
Net cash provided by operating activities 2,549,775 11,971,736 9,472,302
Cash flows provided by (used in) investing activities:
Acquisition and development of investment properties (4,238,794) (4,674,649) (22,173,231)
Refurbishment of investment properties (4,640,874) (8,054,960) (5,696,331)
Cash restricted for refurbishment of properties 475,692 1,314,710 (976,259)
Net proceeds from sales of investment properties 11,165,886 8,838,990 53,606,876
Collections on mortgage and other notes receivable 7,092,927 6,824,103 2,236,599
--------------- -------------- --------------
Net cash provided by investing activities 9,854,837 4,248,194 26,997,654
Cash flows provided by (used in) financing activities:
Repayment of notes payable (26,477,750) (76,161,920) (43,263,684)
Proceeds from notes payable 15,060,000 46,698,272 14,053,727
Distributions to minority interests (166,953) - (157,143)
Deferred financing costs (1,011,584) (1,916,209) (553,482)
--------------- -------------- --------------
Net cash used in financing activities (12,596,287) (31,379,857) (29,920,582)
--------------- -------------- --------------
Net increase (decrease) in cash and cash equivalents (191,675) (15,159,927) 6,549,374
Cash and cash equivalents at beginning of year 4,421,943 19,581,870 13,032,496
--------------- -------------- --------------
Cash and cash equivalents at end of year $ 4,230,268 $ 4,421,943 $ 19,581,870
=============== ============== ==============
Supplementary disclosure of cash flow information:
Cash paid during the year for interest,
including $315,000 capitalized to land held
for development in 2000 $ 27,477,922 $ 30,739,320 $ 30,820,761
=============== ============== ==============
Cash paid during the year for income taxes $ - $ - $ 4,783,625
=============== ============== ==============
See accompanying notes to consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000
1. Organization and Basis of Presentation
MOA Hospitality, Inc., an 85%-owned subsidiary of New Image Realty,
Inc. ("New Image"), owns, develops, manages, and has equity interests in various
national brand affiliated limited service lodging facilities in 38 states
throughout the United States. At December 31, 2000, the Company's largest
concentrations of lodging facilities were located in the States of Georgia and
Illinois with 13 lodging facilities in Georgia and 10 lodging facilities in
Illinois. The consolidated financial statements include the accounts of MOA
Hospitality, Inc. and all wholly owned subsidiaries and all entities in which it
has a controlling interest (collectively, the "Company"). All significant
intercompany accounts have been eliminated in consolidation. Certain
reclassifications of prior-period amounts have been made to conform with the
current-period presentation which have not changed operations or stockholders'
equity.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Cash Equivalents
Cash equivalents represent liquid assets with a maturity of three
months or less when purchased.
Restricted Cash
Restricted cash represents cash that, under the terms of certain
mortgage notes payable, has been set aside for the refurbishment of motel
properties.
Investment Properties
The Company's operating properties are stated at cost less accumulated
depreciation. Operating properties, excluding land, are depreciated using the
straight-line method over the estimated useful lives of the assets (buildings -
40 years; furniture and equipment - 7 years).
Maintenance and repair costs are expensed as incurred, while
significant improvements, replacements and major renovations are capitalized.
The Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. An impairment loss is measured as the difference between the
carrying value and fair value.
Marketing costs are expensed as incurred.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2. Summary of Significant Accounting Policies- (Continued)
Financing and Other Deferred Costs
Financing costs are amortized over the terms of the related
indebtedness using the level yield method. Franchise costs are amortized using
the straight-line method over the life of the related franchise agreement.
Earnings Per Share
Basic and fully diluted earnings per share are based on the weighted
average number of shares of common stock outstanding during each period.
3. Mortgage and Other Notes Receivable
Mortgage notes receivable in the amounts of $25,000,007 and $24,454,408
at December 31, 2000 and 1999, respectively, represent notes collateralized by
motel properties. The notes provide for monthly principal and interest (various
rates of 8% to 12%) receipts over various terms through 2005, although certain
notes are callable prior to their due dates.
Other notes receivable in the amount of $588,303 and $601,828 at
December 31, 2000 and 1999, respectively, bear an interest rate of 11% and are
receivable through 2016.
Notes receivable of $11,363,679 at December 31, 1999 have been pledged
as collateral for a loan facility. The loan facility had an outstanding balance
of $5,985,144 at December 31, 1999.
Notes receivable of $20,474,765 at December 31, 2000 have been pledged
as collateral for a loan facility. The loan facility had an outstanding balance
of $10,318,911 at December 31, 2000.
Two notes receivables in the amounts of $2,164,000 and $964,000 were
transferred to an affiliate as of December 31, 1999 in partial settlement of
amounts owed to the affiliate pursuant to the tax allocation agreement among the
parties.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4. Operating Properties
The major classes of operating properties, at cost, are as follows:
December 31,
-------------------------------
2000 1999
-------------- --------------
Land $ 43,897,002 $ 45,695,630
Buildings 223,444,895 238,670,582
Furniture and Equipment 59,558,636 60,473,596
-------------- --------------
326,900,533 344,839,808
Less: Accumulated depreciation (94,534,171) (88,230,535)
-------------- --------------
$ 232,366,362 $ 256,609,273
============== ==============
Depreciation expense equaled $11,886,201, $12,135,308, and $12,942,987
for the years ended December 31, 2000, 1999 and 1998, respectively.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. Notes Payable and Senior Subordinated Notes
In September 1995, the Company completed funding of a financing
transaction with Nomura Asset Capital Corporation ("NACC"). Motels of America,
L.L.C. (the "LLC"), a limited purpose subsidiary, obtained a loan from NACC in
the principal amount of $158.8 million evidenced by a Promissory Note ("Note")
due 2015. The Note is secured by 93 motel properties owned by the LLC. The loan
requires fixed monthly payments (based on a 20-year amortization schedule) of
principal and interest totaling approximately $1,390,000 through October 11,
2005; thereafter, if the loan is not repaid, excess cash flow as defined is
applied as additional principal payments. Interest accrues at 8.62% through
October 11, 2005, and thereafter at a fixed rate per annum equal to the greater
of (i) 10.62% or (ii) the yield as of October 11, 2005 on ten-year U.S. Treasury
notes, plus 4.5%.
In 1997, an affiliate of the Company was formed for the sole purpose
of constructing lodging properties to be acquired by a subsidiary of the Company
upon completion at cost. Such affiliate develops the lodging properties from its
own funds, payments from the Company on account to be applied towards the
purchase price and the proceeds of a $20.0 million revolving construction loan
facility arranged by the affiliate. In connection with the construction loan
facility, the Company had guaranteed completion of the construction of each
property and the subsidiary acquiring the properties had guaranteed the
construction loan facility to a maximum of $10.0 million. Property acquisitions
were funded from a $150.0 million secured loan facility between the subsidiary
acquiring the properties and CS First Boston (`CSFB'). This facility provided
for, among other things, interest computed at a rate based upon the thirty (30)
day LIBOR rate plus 300 basis points, monthly principal and interest payments at
an 11.5% per annum constant, and repayment of the outstanding balance of each
funding made pursuant to the facility forty-two (42) months after the date of
each such funding. In addition, the Company has pledged its interest in a wholly
owned subsidiary to secure up to $20.0 million of borrowing under the facility.
The $20.0 million revolving construction loan facility of the affiliate matured
in 1998. The outstanding balances were paid in full upon the purchase of
financed properties by a subsidiary of the Company with funds borrowed under the
$150.0 million secured loan facility with CSFB and the application of amounts
previously deposited with the affiliate. At December 31, 1998 the $150.0 million
secured loan facility with CSFB matured with no further borrowings available for
this loan facility. At December 31, 2000, approximately $14.7 million of
borrowings were outstanding under the $150.0 million CSFB secured loan facility.
The amount outstanding is secured by eleven properties and a pledge of the
common stock of the subsidiary that owns such properties. As a result of the
Company's under utilization of the CSFB loan facility, the Company changed its
estimate of the economic benefit of certain deferred loan costs incurred in
connection with obtaining the facility and accordingly accelerated the
amortization of $1.9 million of such costs in 1998.
In 1994, the Company completed an offering of $80,000,000 in
principal amount of 12% Senior Subordinated Notes due April 15, 2004, Series B.
In conjunction with this offering, 80,000 shares of common stock were also
issued. These Notes have been registered under the Securities Act of 1933 and
are freely transferable by holders thereof. Interest on the Notes is payable
semiannually. The Notes were not redeemable by the Company prior to April 15,
1999. The Company may redeem the Subordinated Notes at 106% reducing to 100%
over the life of the Subordinated Notes plus any accrued and unpaid interest. In
October 1999, the Company repurchased from an affiliated company $35 million of
the 12% Senior Subordinated Notes for a gain of $1.9 million, which was offset
by the accelerated write-off of deferred financing costs of $1.9 million. The
repurchase transaction included the assumption of $8.75 million of notes payable
of the affiliate. In March 2000, the Company repurchased from an affiliated
company $10.5 million of the 12% Subordinated Notes for a gain of approximately
$4.2 million which was partially offset by a $0.6 million write-off of
accelerated deferred financing costs. The repurchase transaction included the
assumption of $4.4 million of notes payable of the affiliate. In October 2000,
the Company repurchased from an affiliated company an additional $20.9 million
of the 12% Subordinated Notes for a gain of approximately $6.7 million which was
partially offset by a $1.1 million write-off of accelerated deferred financing
costs. The repurchase transaction included the assumption of $3.7 million of
notes payable of the affiliate. A portion of the purchase price ($12,297,000 and
$ in 2000 and 1999, respectively) of each repurchase transaction was satisfied
through a reduction of tax amounts due from the parent under the tax sharing
agreement.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
An extraordinary gain of $5,653,349, net of income taxes, was
recognized in 2000 relating to the repurchase of the 12% Subordinated Notes.
The declaration and payment of dividends by the Company is restricted
by the indenture relating to the 12% Senior Subordinated Notes.
Subsequent to December 31, 2000 construction financing was secured in
the amounts of $3.5 million and $7.0 million, respectively
A summary of mortgage and other notes payable is as follows:
December 31,
------------------------------
2000 1999
------------- -------------
Mortgage and other notes:
Mortgage note payable secured by 93 motels,
with interest at 8.62% per annum through October 10, 2005.
Rate equal to greater of 10.62% or ten-year Treasury note
plus 4.5% thereafter. Principal and interest payable monthly;
due October 11, 2015. $140,672,372 $144,826,404
Mortgage note payable secured by 1 motel, with interest at
9.5% for the first 3 years, then adjusted at years 3 and 6 to
Prime plus 0.5%; monthly principal and interest; due
April 20, 2007. 2,075,759 -
Mortgage note payable secured by 1 motel, with interest at 9.0%,
monthly principal and interest; due December 1, 2010. 3,000,000 -
Various mortgage notes payable currently secured by 3 and 6 motels
at December 31, 2000 and 1999, respectively with fixed interest
from 7.85% to 10.25%; principal and interest payments
payable monthly; due dates from May 1, 1999 to June 1, 2016. 2,331,088 4,877,930
Note secured by undeveloped land with a fixed interest rate of 8%;
interest payable monthly, Paid In Full March 19, 2001. 1,440,000 1,440,000
Various mortgage notes payable secured by 1 motel; with variable
interest based on prime or Treasury bill rates; principal and
interest payments payable monthly; due February 1, 2009. 2,612,637 2,679,931
Mortgage note payable secured by a 4 motels, with interest at LIBOR
plus 3.25%; monthly principal and interest payment, additional
monthly principal payment of $20,833.33 and all excess cash flow
in year one. Due January 1, 2004. 7,073,322 10,306,417
Mortgage note payable secured by 8 motels, with interest at Prime
plus 0.5% points; monthly principal and interest; due
April 1, 2006. 7,703,556 16,368,092
Note payable unsecured, with a fixed interest rate of 10%,
initial principal payment $575,000 and three additional
annual principal payments of $200,000. Due July 19, 2002. 362,983 519,098
Mortgage note payable secured by a guarantee of New Image
with a fixed interest rate of 14%; interest payments payable
quarterly; due on demand. 8,400,000 8,400,000
Notes payable secured by ten motels and a pledge of stock of one
of MOA Hospitality, Inc.'s subsidiaries, with interest at a
floating rate of LIBOR plus 3%; principal and interest payments
payable monthly; due April 8, 2001 through June 18, 2002. 14,658,999 17,063,737
Industrial development revenue bonds secured by a motel with
interest payable semiannually at 10.5%; annual sinking fund
redemptions of principal on December 1 through 2016. 3,365,000 3,445,000
Note payable secured by $20,098,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of 9.5%,
interest payable monthly and semi-annual principal payment.
Due October 25, 2001. 1,700,000 3,750,000
Note payable secured by note receivable, with an interest
rate of Prime plus 1.25%, monthly interest and principal
payments. Due April 1, 2006 10,318,911 5,985,144
Note payable secured by $15,000,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
13.5%. Monthly interest payments. Due December 22, 2000 - 5,000,000
Note payable secured by $15,000,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
13.5%. Monthly interest payments. Due December 22, 2001 4,500,000 -
Note payable secured by $10,497,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
9.0%. Monthly interest payments. Due April 15, 2004 4,565,583 -
Note payable secured by $20,929,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
12%. Monthly interest payments. Due April 15, 2004 2,000,000 -
Note payable secured by $20,929,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
12%. Monthly interest payments. Due April 15, 2004 600,000 -
Note payable secured by $20,929,000 of 12% Subordinated Notes
repurchased by the Company, with a fixed interest rate of
12%. Monthly interest payments. Due April 15, 2004 1,140,000 -
Note payable secured by the cash flow of the LLC with
interest at 10.5% ; monthly principal and interest; due May
15, 2004. 2,900,317 -
Other notes payable - 17,540
------------- -------------
221,420,498 224,679,293
Less current portion (28,518,916) (13,153,969)
------------- -------------
$192,901,582 $211,525,324
============= =============
Principal payments required on notes payable and the Senior Subordinated Notes
are scheduled as follows:
Years ended December 31,
2001 $ 28,518,916
2002 17,580,912
2003 7,738,676
2004 33,995,923
2005 120,964,702
Thereafter 26,097,369
-------------
Sub-total 234,896,498
Less: Discount, net of accumulated
amortization (351,205)
-------------
$234,545,293
=============
6. Leases
The Company leases certain properties, administrative offices, and
equipment under operating leases. The leases generally provide for the Company
to pay taxes, insurance, and maintenance expenses related to the leased
property. Rent expense was approximately $398,000, $504,000, and $806,000 for
the years ended December 31, 2000, 1999 and 1998, respectively. Minimum annual
rentals for leases on properties and the corporate office for the five years
subsequent to December 31, 2000 and thereafter, are approximately as follows:
Years ended December 31,
2001 $ 296,000
2002 86,000
2003 35,000
2004 35,000
2005 33,000
Thereafter 560,000
-----------
$1,012,000
===========
The Company, as lessor, has entered into operating leases with
unaffiliated parties to operate seventy-five and forty-three motel properties at
December 31, 2000 and 1999, respectively. Under the terms of these leases, the
lessee is responsible for operating costs including all maintenance, repairs,
taxes and insurance expense on the leased property. The leases, which have a
terms ranging from five and a half years to six and half years, provide for
monthly rent payments. In addition, the lease grants the lessee an option to
purchase the leased properties at prices believed by management to reflect
market value, which in the aggregate is $141,500,000 and $78,600,000 at December
31, 2000 and 1999, respectively. Nonrefundable deposits, aggregating
approximately $19,600,000 and $9,800,000 at December 31, 2000 and 1999,
respectively, received from lessees can be applied towards the purchase prices
of the leased properties. In addition, monthly lease payments are allocated
between rental income and a nonrefundable purchase price credit to be applied if
the purchase option is exercised. The deposits and real estate tax and other
amounts collected from the lessees aggregating $4,800,000 and $2,300,000 at
December 31, 2000 and 1999, respectively are reflected in the balance sheet as a
liability. Future minimum rentals under the lease (assuming that the purchase
options are not exercised prior to expiration) are approximately as follows:
Years ended December 31,
2001 $ 11,558,000
2002 11,225,000
2003 10,811,000
2004 10,548,000
2005 2,647,000
-------------
$ 46,789,000
=============
7. Impairment losses and restructuring costs
In 1998, impairment losses of $9,300,000 were recorded to reflect the
writedown of certain properties to their estimated fair value.
In 1999, impairment losses of $928,000 were recorded to reflect the
writedown of certain properties to their estimated fair value. Restructuring
costs of $450,000 were recorded to reflect the downsizing of corporate employees
due to the reduction of operating properties.
8. Income Taxes
Total income tax expense was allocated as follows:
2000 1999 1998
------------ ------------ -----------
Income from operations $(4,002,914) $(4,680,555) $2,068,563
Extraordinary item 3,602,298 - -
------------ ------------ -----------
$ (400,616) $(4,680,555) $2,068,563
============ ============ ===========
Income tax expense (benefit) consists of:
Current Deferred Total
------------ ------------ ------------
Year ended December 31, 2000
U.S. federal $(4,987,549) $ 1,751,331 $(3,236,218)
State and local 94,415 (861,111) (766,696)
------------ ------------ ------------
$(4,893,134) $ 890,220 $(4,002,914)
============ ============ ============
Year ended December 31, 1999
U.S. federal $(4,711,638) $ 927,573 $(3,784,065)
State and local (1,615,767) 719,277 (896,490)
------------ ------------ ------------
$(6,327,405) $ 1,646,850 $(4,680,555)
============ ============ ============
Year ended December 31, 1998
U.S. federal $ 5,273,060 $(3,600,699) $ 1,672,361
State and local 1,689,240 (1,296,038) 396,202
------------ ------------ ------------
$ 6,962,300 $(4,893,737) $ 2,068,563
============ ============ ============
8. Income Taxes - (Continued)
Income tax expense (benefit) differs from the amounts computed by
applying the U.S. federal income tax rate of 34% to income before income taxes
and extraordinary item as a result of the following:
Year Ended December 31,
-----------------------------------------
2000 1999 1998
------------ ------------ -----------
Computed "expected" tax
expense (benefit) $(3,549,669) $(4,200,725) $1,774,959
Increase (decrease) in income
taxes resulting from:
State income taxes, net of
federal income tax effect (506,021) (591,684) 261,494
Other, net 52,776 111,854 32,110
------------ ------------ -----------
$(4,002,914) $(4,680,555) $2,068,563
============ ============ ===========
The deferred tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts reported for income tax purposes are as follows:
December 31,
------------------------------
2000 1999
------------- -------------
Deferred tax assets:
Reserves, primarily impairment losses $ (2,324,446) $ (3,749,866)
Net state operating loss carryforwards (1,920,819) (806,762)
Federal tax credits carryover (447,201) (633,727)
Other, net (275,743) (265,501)
------------- -------------
Total deferred tax assets (4,968,209) (5,455,856)
Deferred tax liabilities:
Lease cost amortization 949,470 -
Investment properties, principally due to
Depreciation and purchase accounting
Adjustments 5,013,757 5,560,654
------------- -------------
Total deferred tax liabilities 5,963,227 5,560,654
------------- -------------
Net deferred tax liability $ 995,018 $ 104,798
============= =============
8. Income Taxes-(Continued)
The Company is a member of an affiliated group that files a
consolidated tax return for federal income tax purposes and has entered into a
tax allocation agreement with New Image and its parent corporation. In
accordance with the agreement, the Company's tax liability/benefit will be
computed as if the Company had filed its own consolidated tax return and is
subject to tax on all of its taxable income. The Company made payments of
approximately $4.8 million, to the parent corporation during 1998. At December
31, 1999 and December 31, 2000, approximately $2.1 million and $1.4 million,
respectively is owed to the parent corporation, which has been included in other
accounts payable and accrued expenses.
At December 31, 2000, the Company has net operating loss carryforwards
("NOLs") for state income tax purposes of approximately $14.2 million. The NOLs,
which are subject to certain limitations, expire at various dates through 2010.
9. Acquisitions and Divestitures
In 1998, the Company sold ten properties, a parcel of vacant land and
an investment in a partnership to unaffiliated parties for approximately $65.5
million consisting of $57.2 million of cash and $8.3 in notes receivable; the
Company recorded a gain of $26.1 million. The Company also leased five
properties to third party operators in 1998.
In 1999, the Company sold ten properties, including one being accounted
for on the installment basis, for approximately $27.8 million consisting of $9.7
million in cash and $18.1 million in notes receivable. The Company realized
gains of approximately $2.5 million and deferred recognition of a gain in the
approximate amount of $1.7 million relating to the sale being accounted for on
the installment basis. The Company also leased an additional thirty-eight
properties to third party operators in 1999.
Also in 1999, the Company purchased one property constructed by an
affiliate for the Company. The property was purchased for $2.9 million.
During 2000, the Company has sold eight properties for approximately
$20.8 million consisting of $11.2 million in cash and $7.6 million in first
mortgage notes. These sale transactions resulted in a net gain of $2.2 million.
The Company also sold a vacant parcel of land at cost during 2000. The Company
also purchased a parcel of land in February 2000 for approximately $250,000 cash
and a note in the amount of $460,000, which was repaid in 2000.
The Company, as lessor, has leased an additional thirty-two motel
properties during 2000.
10. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
Mortgage and other notes receivable: The fair values of the Company's
mortgage and other notes receivable are estimated using discounted cash
flow analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings.
Mortgage and other notes payable: The fair values of the Company's
mortgage and other notes payable are estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing
rates for similar types of borrowing arrangements.
12% Senior Subordinated Notes: The fair value of the Company's 12%
Senior Subordinated Notes are based on quoted market prices.
The carrying amounts and fair values of the Company's financial
instruments at December 31 are as follows:
Carrying Carrying
Amount Fair Value Amount Fair Value
2000 2000 1999 1999
------------- -------------- ------------- -------------
Cash and cash equivalents $ 4,230,268 $ 4,230,268 $ 4,421,943 $ 4,421,943
Mortgage and other notes
receivable 25,588,310 25,959,789 25,056,236 24,759,095
Secured notes payable 221,420,498 217,419,803 224,679,293 224,363,195
12% Senior Subordinated
Notes 13,124,795 8,668,747 43,501,040 31,320,748
11. Segments
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No 131, "Disclosures About Segments of an Enterprise and
Related Information"("Statement No. 131") establishes standards for the manner
in which public business enterprises report information regarding reportable
operating segments.
The Company, directly and through subsidiaries, owned 118 lodging
facilities in 38 states, 126 lodging facilities in 39 states and 135 lodging
facilities in 38 states for the years ended December 31, 2000, 1999 and 1998,
respectively. The Company owns a 100% interest in all but one of its properties
and also operates all but seventy-five, forty-three and five of its motels for
the years ended December 31, 2000, 1999 and 1998, respectively, which are leased
to third party tenants pursuant to operating leases and one to an affiliated
party. The Company separately evaluates the performance of each of its motels.
However, because each of the motels has similar economic characteristics, the
motels have been aggregated into a single dominant motel segment as indicated
below. (certain of the 1999 and 1998 numbers have been reclassified to conform
to the 2000 presentation):
11. Segments (continued)
2000 1999 1998
---------- ---------- ----------
(in thousands)
Motel operations:
Motel operating revenue:
Room revenues $ 53,824 $ 90,382 $ 107,841
Ancillary motel revenues 4,274 5,504 6,404
---------- ---------- ----------
Total motel operating revenues 58,098 95,886 114,245
Motel costs and expenses:
Motel operating expenses 31,598 53,856 60,172
Marketing and royalty fees 4,174 6,786 7,515
Depreciation and amortization 7,481 11,468 14,575
---------- ---------- ----------
Total motel direct expenses 43,253 72,110 82,262
---------- ---------- ----------
14,845 23,776 31,983
Lease Operations:
Lease revenues 10,142 2,477 -
Lease operating expenses 460 158 -
Depreciation and amortization 6,690 1,922 -
---------- ---------- ----------
2,992 397 -
Vending Operations:
Vending revenues 1,072 948 762
Vending operating expenses 1,081 718 436
Depreciation and amortization 226 265 170
---------- ---------- ----------
(235) (35) 156
Corporate Operations
Other revenues 2,880 4,121 1,319
General and administrative expenses:
Management Company Operations 4,813 8,944 9,716
Construction/Acquisition and Divestiture 975 907 846
Vending general and administrative 622 500 543
---------- ---------- ----------
Total general and administrative expenses 6,410 10,351 11,105
Impairment losses and restructuring costs - 1,378 9,300
Depreciation and amortization 662 1,323 3,250
---------- ---------- ----------
(4,192) (8,931) (22,336)
---------- ---------- ----------
Net operating income 13,410 15,207 9,803
Interest expense 25,555 30,070 30,578
---------- ---------- ----------
Loss from operations (12,145) (14,863) (20,775)
Minority interests (472) (20) (84)
Gain on sale of properties 2,177 2,528 26,079
---------- ---------- ----------
Income (loss) before income taxes
and extraordinary item (10,440) (12,355) 5,220
Income tax expense (benefit) (4,003) (4,681) 2,068
---------- ---------- ----------
Income (loss) before extraordinary item (6,437) (7,674) 3,152
Gain on early extinguishment of debt 5,653 - -
---------- ---------- ----------
Net Income (loss) $ (784) $ (7,674) $ 3,152
========== ========== ==========
Total Assets:
Motel operations $ 137,785 $ 207,835 $ 302,132
Lease operations 121,072 73,929 -
Corporate and other 28,826 31,441 36,923
---------- ---------- ----------
$ 287,683 $ 313,205 $ 339,055
========== ========== ==========
12. Contingencies
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.
The Company remains contingently liable on a $2.3 million note
assumed by a purchaser of an operating property in the event that the purchaser
does not perform under its obligations.
In July 1999, the Company entered into a settlement agreement with
ShoLodge resolving all disputes with respect to the litigation initiated by the
Company. The settlement agreement requires the Company to make an initial
payment of $575,000 in July 1999 and three subsequent payments of $200,000 in
July 2000, 2001 and 2002.
13. Subsequent Events
In January 2001 the lessee of two motel properties defaulted
under the terms of the operating leases thereby forfeiting security deposits
totaling $310,000. The Company assumed the operations of the motels and does not
anticipate incurring costs in excess of the forfeited security deposits to
repair and restore such motels. Additionally, subsequent to December 31, 2000,
the Company has entered into operating leases for two motel properties that
require monthly rental payments of $53,000, non-refundable security deposits of
$1,200,000 and provides for a final option purchase price of $8,000,000.
Also, subsequent to December 31, 2000 the Company obtained
construction loans in the amounts of $7,000,000 at an interest rate of 9.75% due
March 1, 2006 and $3,500,000 at an interest rate of 8.32%, due when construction
is finished which will then be converted to a permanent loan with GE Capital at
similar rates for approximately ten years with a twenty year amortization
schedule.
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, on the 30th day of May
2001.
MOA HOSPITALITY, INC.
By: /s/ Kurt M. Mueller
Kurt M. Mueller
President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Paul F. Wallace Director, Chairman and May 30, 2001
Paul F. Wallace Chief Executive Officer
Principal Executive Officer
/s/ Kurt M. Mueller Director, President and May 30, 2001
Kurt M. Mueller Chief Financial Officer
Principal Financial Officer
/s/ Alan H. Baerenklau Director May 30, 2001
Alan H. Baerenklau
/s/ Carl W. Desch Director May 30, 2001
Carl W. Desch
/s/ Peter W. McClean Director May 30, 2001
Peter W. McClean
/s/ Herbert Gould Director May 30, 2001
Herbert Gould
/s/ Ronald P. Stewart Director May 30, 2001
Ronald P. Stewart
/s/ Philip J. Levien Director May 30, 2001
Philip J. Levien
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Description Number
3.1 Certificate of Incorporation of Motels of America, Inc.
("MOA" or the "Company") as amended to date, incorporated
by reference to Exhibit 3.1 to MOA's Registration
Statement on Form S-1 (No. 33-78866) which became
effective on July 13, 1994 (the "1994 Form S-1").
3.2 By-laws of MOA, incorporated by reference to Exhibit 3.2
to the 1994 Form S-1.
4.1 Indenture dated April 14, 1994 for the 12% Senior
Subordinated Notes due 2004, incorporated by reference
to Exhibit 4.1 to the 1994 Form S-1.
4.2 Registration Rights Agreement dated as of April 14, 1994
by and among MOA, Alex. Brown and BT Securities,
incorporated by reference to Exhibit 4.2 to the 1994
Form S-1.
4.3 Loan Agreement between Motels of America, L.L.C. and
Nomura Asset Capital Corporation ("NACC") dated as of
September 15, 1995, incorporated by reference to Exhibit
4.1 to MOA's Form 8-K filed on November 4, 1995.
4.4 Form of Mortgage, Security Agreement, Assignment of Rents
and Fixture Filing between MOA-TL Corp. and MOA-CS Corp.,
as Mortgagor to CS First Boston Mortgage Capital Corp.,
as Mortgagee, dated as of November 5, 1996, incorporated
by reference to Exhibit 4.4 to MOA's Form 10-K for the
fiscal year ended December 31, 1996 (the "1996 Form 10-K").
10.1 Note Purchase Agreement dated as of October 20, 1994,
among NACC and MOA, MOA Midwest Corp. and Tri-State Inns,
Inc. (the "Note Purchase Agreement"), incorporated by
reference to Exhibit 10.2 to MOA's Form 10-K for the
fiscal year ended December 31, 1994 (the "1994 Form 10-K").
10.1A Amendment No. 1 to the Note Purchase Agreement, dated as
of October 20, 1994, incorporated by reference to Exhibit
10.2A to the 1994 Form 10-K.
10.1B Environmental Indemnity Agreement dated as of October 20,
1994, incorporated by reference to Exhibit 10.2B to the
1994 Form 10-K.
Sequential
Exhibit Page
Number Description Number
10.1C Amendment No. 2 to the Note Purchase Agreement, dated
as of December 16, 1994, incorporated by reference to
Exhibit 10.1B to MOA's Form 8-K filed on February 7,
1996 (the "1996 Form 8-K").
10.1D Amendment No. 3 to the Note Purchase Agreement, dated
as of January 23, 1996, incorporated by reference to
Exhibit 10.1C to the 1996 Form 8-K.
10.2 Note Purchase Agreement dated as of January 23, 1996,
among NACC and MOA-TL Corp., incorporated by reference
to Exhibit 10.2 to the 1996 Form 8-K.
10.3 $10,000,000 Promissory Note of MOA-TL Holding Corp.
payable to HFS Incorporated, dated as of January 23,
1996, incorporated by reference to Exhibit 10.3 to
the 1996 Form 8-K.
10.4 Asset Purchase Agreement dated as of December 19, 1995,
by and among MOA, Forte Hotels, Inc. and Forte USA, Inc.
(the "Asset Purchase Agreement"), incorporated by
reference to Exhibit 10.4 to the 1996 Form 8-K.
10.4A First Amendment to the Asset Purchase Agreement, dated
as of January 23, 1996, incorporated by reference to
Exhibit 10.4A to the 1996 Form 8-K.
10.5 Employment Agreement of Daniel W. Daniele dated
September 14, 1994, incorporated by reference to Exhibit
10.5 to the 1994 Form 10-K.
10.6 $20,000,000 Promissory Note of MOA-TL Corp. payable to
CS First Boston Mortgage Capital Corp., dated as of
November 5, 1996, incorporated by reference to Exhibit
10.6 to MOA's Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 Form 10-K").
10.7 $17,150,000 Promissory Note of MOA-CS Corp. payable to CS
First Boston Mortgage Capital Corp., dated as of
November 5, 1996, incorporated by reference to Exhibit 10.7
to MOA's Form 10-K for the fiscal year ended December 31,
1996 (the "1996 Form 10-K").
10.8 Credit facility agreement up to $150,000,000 between TAD
Properties, L.L.C. and Credit Suisse First Boston Mortgage
Capital., date as of December 20, 1996, incorporated by
reference to Exhibit 10.8 to MOA's Form 10-K for the fiscal
year ended December 31, 1997 (the "1997 Form 10-K).
10.8A Amendment to credit facility agreement, dated as of
October 8, 1997, incorporated by reference to Exhibit 10.8
to MOA's Form 10-K for the fiscal year ended December 31,
1997 (the "1997 Form 10-K).
21.1 Subsidiaries of MOA.