UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001.
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
(847) 803-1200
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ ] Yes [X] No
Number of shares of Common Stock, $.01 par value outstanding as of
February 28, 2002: 800,000
INDEX TO FORM 10-Q
Page
Part I Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - March 31, 2001 2
(unaudited) and December 31, 2000.
Condensed consolidated statements of operations - 3
Three months ended March 31, 2001 and 2000 (unaudited).
Condensed consolidated statements of cash flows - 4
Three months ended March 31, 2001 and 2000 (unaudited).
Notes to condensed consolidated financial statements - 5
March 31, 2001 (unaudited).
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General 8
Results of Operations 9
Liquidity and Capital Resources 12
Part II Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 5,715 $ 4,230
Accounts receivable from property operations 1,541 1,537
Operating supplies and prepaid expenses 2,065 2,032
Current portion of mortgage and notes receivable 5,999 6,185
----------- ------------
Total Current Assets 15,320 13,984
Investment property:
Operating properties, net of accumulated depreciation 230,225 232,366
Land held for development 10,042 8,366
----------- ------------
Total investment property 240,267 240,732
Other Assets:
Deposits and other assets 1,601 2,399
Mortgage and other notes receivable, less current portion 13,285 19,403
Financing and other deferred costs, net of accumulated
amortization of $15,105 in 2001 and $14,413 in 2000 10,601 11,165
----------- ------------
Total Other Assets 25,487 32,967
----------- ------------
Total Assets $ 281,074 $ 287,683
=========== ============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 969 $ 1,109
Real estate taxes payable 1,438 1,373
Accrued interest payable 2,495 2,003
Other accounts payable and accrued expenses 6,627 6,924
Other liabilities, including nonrefundable lease deposits of 25,828 24,432
$20,131 in 2001 and $19,597 in 2000
Current portion of long-term debt 34,745 28,519
----------- ------------
Total Current Liabilities 72,102 64,360
Net deferred tax liability 754 995
Long-term debt, less current portion:
Mortgage and other notes payable 181,406 192,902
12% Senior Subordinated Notes, net of unamortized
discount of $309,000 in 2001 and $351,000 in 2000 13,167 13,125
----------- ------------
Total Long-term debt, excluding current portion 194,573 206,027
----------- ------------
Total Liabilities 267,429 271,382
----------- ------------
Minority Interests 2,001 2,014
Stockholders' equity:
Common stock, $.01 par value, 1,500,000 shares
authorized; 800,000 shares issued and outstanding 8 8
Additional paid-in capital 15,294 15,294
Retained deficit (3,658) (1,015)
----------- ------------
Total stockholders' equity 11,644 14,287
----------- ------------
Total Liabilities and Stockholders' Equity $ 281,074 $ 287,683
=========== ============
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except share data)
Three Months Ended
March 31
------------------------
2001 2000
---------- -----------
Revenues:
Motel operating revenues $ 9,870 $ 14,658
Lease revenues 2,930 1,894
Vending revenues 329 223
Other revenues 593 671
---------- -----------
Total revenues 13,722 17,446
Costs and expenses:
Motel operating expenses 6,056 9,666
Marketing and royalty fees 743 1,055
General and administrative 1,786 1,374
Lease expenses 230 120
Vending expenses 381 190
Depreciation and amortization 3,626 3,636
---------- -----------
Total direct expenses 12,822 16,041
---------- -----------
Net operating income 900 1,405
Interest expense 5,241 6,527
---------- -----------
Loss from operations (4,341) (5,122)
Minority interests 13 22
Gain on sale of properties - 391
---------- -----------
Loss before income taxes
and extraordinary item (4,328) (4,709)
Income tax benefit (1,685) (1,833)
---------- -----------
Loss before extraordinary item (2,643) (2,876)
Gain on early extinguishment of debt, net of
applicable income taxes of $1,437 - 2,255
---------- -----------
Net loss $ (2,643) $ (621)
========== ===========
Net loss per common share:
Loss before extraordinary item (3.30) (3.60)
Extraordinary item - 2.82
---------- -----------
Net loss per common share (basic and diluted) $ (3.30) $ (0.78)
========== ===========
Weighted average number of
common shares outstanding 800,000 800,000
========== ===========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
March 31
---------------------
2001 2000
--------- ---------
Cash flows (used in) provided by operating activities:
Net loss $ (2,643) $ (621)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation, amortization and accretion of
discount on notes 3,654 3,655
Minority interests of others in net loss
from operations (13) (22)
Deferred income taxes (241) 205
Gain on early extinguishment of debt - (3,692)
Gain on sale of properties - (391)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (4) 6
Operating supplies, prepaid expenses,
deposits and other assets (165) (975)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,024 (2,016)
Accrued interest payable 492 1,311
--------- ---------
Net cash provided by (used in) operating activities 2,104 (2,540)
Cash flows provided by investing activities:
Acquisition and development of investment properties (1,676) (311)
Refurbishment of investment properties (778) (1,781)
Net proceeds from sale of investment properties - 1,540
Cash restricted for refurbishment of properties 801 (177)
Collections on mortgage and other notes receivable 6,304 1,117
--------- ---------
Net cash provided by investing activities 4,651 388
Cash flows provided by (used in) financing activities:
Proceeds from notes payable 1,824 6,579
Repayment of notes payable (7,094) (2,623)
Deferred financing costs - (253)
--------- ---------
Net cash (used in) provided by financing activities (5,270) 3,703
--------- ---------
Net increase in cash and cash equivalents 1,485 1,551
Cash and cash equivalents at beginning of period 4,230 4,422
--------- ---------
Cash and cash equivalents at end of period $ 5,715 $ 5,973
========= =========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 4,692 $ 5,158
========= =========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2001 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2001. For further information, refer to the consolidated financial statements
and footnotes thereto included in MOA Hospitality, Inc. and Subsidiaries' Annual
Report on Form 10-K for the year ended December 31, 2000. The terms "MOA" and
the "Company" mean MOA Hospitality, Inc. and its subsidiaries. Certain
reclassifications of prior-period amounts have been made to conform with
current-period presentation which have not changed operations or stockholders'
equity.
2. Divestitures and Leasing Activities
In January through July 31, 2001, the Company leased an additional
three, and re-leased one of its lodging facilities to third party operators
under terms similar to previous operating leases executed by the Company.
Subsequent to July 31, 2001 and prior to December 31, 2001 the Company
re-leased two of its lodging facilities to third party operators under terms
similar to previeous operating lease executed by the Company.
Subsequent to December 31, 2001 the Company leased an additional two
and re-leased one of its loadging facilities to third party operators under
terms similiar to previous operating leases executed by the Company.
In January through July 31, 2001, the Company sold two of its lodging
facilities. One for approximately $3.6 million in cash for gain of $963,000 and
the other to a related party for $8,000,000 resulting in a deferred gain of
$3,260,000 and a note receivable of $7,150,000. The Company also sold its
partnership interest in one lodging facility for $200,000. The Company also
recognized a deferred gain of $1.7 million on one of it lodging facilities sold
in a prior year.
Subsequent to July 31, 2001 and prior to December 31, 2001, the Company
has sold three of its lodging facilities. One of which was previously leased
for approximately $1.9 million in cash for a gain of $792,000 and the two others
to related parties at fair market value for $9,480,000 resulting in a deferred
gain of $2,238,000 and notes receivable of $8,480,000.
Subsequent to December 31, 2001, the Company sold one of its lodging
facilites for approximately $2.2 million in cash for a loss of $696,000.
3. Mortgage and Other Notes Payable
In January through March 31, 2001 the Company was advanced $1.8 million
on loans of $10.5 million for construction advances on two properties under
construction.
In June 2001, the Company refinanced $3,997,000 of debt with new loans
of $3,425,000 at 8.84% due August 1, 2011, with monthly principal and interest
payments of $30,464 secured by two properties located in East Syracuse, NY and
Wilson, NC.
In July 2001, the Company borrowed $1,000,000 at prime plus .5% due
June 12, 2002.
During July through September 30, 2001 the Company was advanced an
additional $2.2 million toward the construction of one property under
construction.
In July 2001, the Company borrowed $3,500,000 at 8.67% due September 1,
2011 with monthly principal and interest payments of $30,751 secured by one
property in Milford, MA, which was used to pay off an existing construction loan
with a balance of $2,877,000.
In August 2001, a subsidiary of the Company purchased a vending company
and assumed debt in the amount of $250,000, non interest bearing with three
annual payments of $83,333, due August 24, 2002, August 24, 2003 and August 24,
2004, $134,000, due November 1, 2008, with monthly principal and interest
payments of $2,168 and $111,000, due April 1, 2007, with monthly principal and
interest payments of $2,146.
In October 2001, the Company repurchased an additional $1.9 million of
the 12% Senior Subordinated Notes from an affiliate at fair market value for a
pre-tax gain $431,000.
4. Income Taxes
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate of 34% to income before income taxes principally as
a result of state income taxes.
5. Contingencies
The Company is involved in various legal proceedings
arising in the ordinary course of business. The Company does not believe that
any of these actions, either individually or in the aggregate, will have a
material adverse effect on the Company's business, results of operations or
financial condition.
The Company remains contingently liable on a $2.3 million note
arising from a sale of a motel in 1997 in a transaction where the purchaser
assumed an existing mortgage loan secured by the property.
6. Segments
As of March 31, 2001 he Company, directly and through
subsidiaries, owned 118 lodging facilities in 38 states. The Company owns a 100%
interest in all but one of its properties. The Company operates forty-four of
its motels and leases seventy-four of its motels to third party tenants pursuant
to operating leases. The Company separately evaluates the performance of each of
its motels.
Three months ended
March 31
----------------------
2001 2000
--------- ---------
Motel operations:
Motel operating revenue:
Room revenues $ 8,996 $ 13,436
Ancillary motel revenues 874 1,222
--------- ---------
Total motel operating revenues 9,870 14,658
Motel costs and expenses:
Motel operating expenses 6,057 9,666
Marketing and royalty fees 743 1,055
Depreciation and amortization 1,670 2,379
--------- ---------
Total motel direct expenses 8,470 13,100
--------- ---------
1,400 1,558
Lease Operations
Lease revenues 2,930 1,894
Lease expenses 230 120
Depreciation and amortization 1,708 1,074
--------- ---------
992 700
Vending Operations
Vending revenues 329 223
Vending expenses 381 190
Depreciation and amortization 76 47
--------- ---------
(128) (14)
Corporate Operations
Other revenues 593 671
General and administrative expenses:
Management Company Operations 1,472 1,102
Construction/Acquisition and Divestiture 34 154
Vending - general and administrative 280 118
--------- ---------
Total general and administrative expenses 1,786 1,374
Depreciation and amortization 171 136
--------- ---------
(1,364) (839)
--------- ---------
Net operating income 900 1,405
Interest expense 5,241 6,527
--------- ---------
Loss from operations (4,341) (5,122)
Minority interests 13 22
Gain on sale of properties - 391
--------- ---------
Loss before income taxes (4,328) (4,709)
Income tax expense (benefit) (1,685) (1,833)
--------- ---------
Net loss before extraordinary item (2,643) (2,876)
Gain on early extinguishment of debt 0 2,255
--------- ---------
Net Loss $ (2,643) $ (621)
Total Assets:
Motel Operations $141,016 $179,700
Lease Operations 117,039 97,082
Other Operations 23,019 35,446
--------- ---------
$281,074 $312,228
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND AS SUCH, SPEAK ONLY AS OF THE DATE MADE. FORWARD-LOOKING STATEMENTS
ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR
THOSE ANTICIPATED AT THE TIME OF THE FORWARD-LOOKING STATEMENTS ARE MADE,
INCLUDING, WITHOUT LIMITATION, RISKS AND UNCERTAINTIES ASSOCIATED WITH THE
FOLLOWING: GENERAL REAL ESTATE, TRAVEL AND NATIONAL AND INTERNATIONAL ECONOMIC
CONDITIONS, INCLUDING THE SEVERITY AND DURATION OF THE DOWNTURN RESULTING FROM
THE SEPTEMBER 11, 2001 TERRORIST ATTACKS ON NEW YORK AND WASHINGTON, D.C.;. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH
FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE COMPANY'S ABILITY TO OBTAIN
FINANCING, COMPETITION, INTEREST RATE FLUCTUATIONS, OR GENERAL BUSINESS AND
ECONOMIC CONDITIONS.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM CONDENSED
CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES
THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL OPERATING RESULTS
PRESENTED BELOW FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 HAVE BEEN
PREPARED ON THE SAME BASIS AS THE INTERIM CONDENSED CONSOLIDATED HISTORICAL
FINANCIAL STATEMENTS AND, IN THE OPINION OF THE COMPANY, INCLUDE ALL ADJUSTMENTS
(CONSISTING ONLY OF NORMAL RECURRING ADJUSTMENTS) NECESSARY TO PRESENT FAIRLY
THE INFORMATION SET FORTH THEREIN.
General
MOA operates principally in the economy limited service segment of the
lodging industry. As a result, its average room rates tend to be lower than the
average room rates of full service lodging facilities. However, due to the
limited nature of the public space and ancillary services provided by limited
service motels, the Company's expenses tend to be lower than those of full
service lodging facilities. The profitability of the lodging industry in general
is significantly dependent upon room rental rates and occupancy rates. Due to
the fixed nature of a relatively high portion of the Company's expenses, changes
in either room rates or occupancy rates result in significant changes in the
operating profit of the Company's motels.
The United States lodging industry has experienced downward pressure on
RevPAR and occupancy throughout 2001 due to the overall slowdown in the economy.
Such pressure was substantially increased as a result of the September 11, 2001
terrorist attacks on New York and Washington D.C. On a same store basis, through
the third quarter RevPAR and occupancy have decreased to $38.19 and 69.61%,
respectively, for 2001 versus $38.94 and 71.03% for 2000. For the period
subsequent to September 11, 2001 through October 31, 2001, RevPar and occupancy
have decreased to $37.98 and 69.57%.
The Company is actively working with its managers and lessees to reduce
operating and overhead expenses and has curtailed or postponed non-essential
capital expenditure activities; however, there can be no assurance that the
results of such efforts will be sufficient to enable the Company to continue
meeting its obligations as they come due.
Three Months Ended March 31, 2001 Compared to the Three Months Ended
March 31, 2000
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
condensed consolidated financial statements presented elsewhere herein.
Supplemental Operating Results and Statistics
--------------------------------------------------------------------------
Three Months Ended March 31
--------------------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
---------------------- -------------------- ------------------------
2001 2000 2001 2000 2001 2000
---------- ---------- --------- --------- ----------- -----------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $ 8,897 $ 8,847 $ 99 $ 4,589 $ 8,996 $ 13,436
Ancillary motel revenues 867 901 7 321 874 1,222
---------- ---------- --------- --------- ----------- -----------
Total motel operating revenues 9,764 9,748 106 4,910 9,870 14,658
Motel costs and expenses:
Motel operating expenses 5,971 5,593 86 4,073 6,057 9,666
Marketing and royalty fees 735 660 8 395 743 1,055
Depreciation and amortization 1,412 1,328 258 1,051 1,670 2,379
---------- ---------- --------- --------- ----------- -----------
Total motel direct expenses 8,118 7,581 352 5,519 8,470 13,100
---------- ---------- --------- --------- ----------- -----------
$ 1,646 $ 2,167 $ (246) $ (609) 1,400 1,558
========== ========== ========= =========
Lease operations:
Lease revenues 2,930 1,894
Lease expenses 230 120
Depreciation and amortization 1,708 1,074
----------- -----------
992 700
Vending operations:
Vending revenues 329 223
Vending expenses 381 190
Depreciation and amortization 76 47
----------- -----------
(128) (14)
Corporate operations:
Other revenues, net 593 671
General and administrative expenses:
Management Company Operations 1,472 1,102
Construction/Acquisition
and Divestiture 34 154
Vending general and administrative 280 118
----------- -----------
Total general and administrative expenses 1,786 1,374
Depreciation and amortization 171 136
----------- -----------
(1,364) (839)
----------- -----------
Net operating income $ 900 $ 1,405
=========== ===========
Other data:
Number of motels at period end (5) 43 43 1 20 44 63
Number of rooms at period end (5) 3,706 3,710 62 1,730 3,768 5,440
Occupancy percentage (5) 60.86% 59.91% 69.49% 52.72% 60.96% 58.39%
ADR (1) (5) $ 43.82 $ 43.73 $ 38.22 $ 39.40 $ 43.75 $ 46.47
REVPAR (2) (5) $ 29.27 $ 28.86 $ 26.82 $ 22.22 $ 29.25 $ 29.60
Net operating income margin (3) 6.56% 8.05%
Net motel revenue margin (4) (5) 34.37% 39.51% 17.04% 9.63% 34.13% 29.30%
- --------------------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total number
of rooms available.
(3) Net operating income margin represents net operating income divided by total
motel operating revenues plus lease revenues plus vending revenues
plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At March 31, 2001 and for the three months then ended, excludes amounts
related to the seventy-four motels which are leased to third party tenants.
Total revenues consist principally of motel operating revenues. Motel
operating revenues are derived from room rentals and ancillary motel revenues
such as charges to guests for food and beverage service, long distance telephone
calls, and fax machine use. Lease revenues are derived from properties leased to
third parties. Vending revenues are derived from vending machines used in the
motels and also vending machines placed in non owned locations. Other revenues
include interest income, and other miscellaneous income. Total revenues
decreased to $13,722,000 for the three months ended March 31, 2001 from
$17,446,000 for the three months ended March 31, 2000, a decrease of $3,716,000
or 21.3%.
Motel revenues decreased to $9,870,000 for the three months ended March
31, 2001 from $14,658,000 for the three months ended March 31, 2000, a decrease
of $4,788,000 or 32.6%. The motel revenues for motels owned during both periods
increased approximately $16,000 and revenues for motels acquired and divested
since January 1, 2000 decreased by $4,804,000. Motel revenues for motels owned
during both periods changed less than 1%. The increase in motel revenues for
motels owned during both periods was attributable to a combined increase in the
average daily rate ("ADR") and the occupancy rate. The ADR for the motels owned
during both periods increased to $43.82 for the three months ended March 31,
2001 from $43.73 for the three months ended March 31, 2000, an increase of $0.09
or less than 1%. The occupancy for the motels owned during both periods
increased to 60.7% for the three months ended March 31, 2001 from 59.91% for the
three months ended March 31, 2000, an increase of 1.3%. Revenue per available
room ("REVPAR") for motels owned during both periods increased to $29.27 for the
three months ended March 31, 2001 from $28.86 for the three months ended March
31, 2000, an increase of $.41 or 1.4%. The acquired and divested motels had an
occupancy percentage of 69.5%, an ADR of $38.22 and REVPAR of $26.82 for the
period, which they were owned by the Company in 2001.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, insurance, linens and other operating
supplies. Motel operating expenses decreased to $6,056,000 for the three months
ended March 31, 2001 from $9,666,000 for the three months ended March 31, 2000,
a net decrease of $3,610,000 or 37.3%. Motel operating expenses for motels
acquired and divested since January 1, 2000 decreased to $86,000 for the three
months ended March 31, 2001 from $4,073,000 for the three months ended March 31,
2000, a decrease of $3,987,000 or 97.9%. The decrease was partially offset by an
increase of $378,000 or 6.8% in the costs of operating the motels owned during
both periods. The cost of operating motels owned during both periods increased
to $5,971,000 for the three months ended March 31, 2001 from $5,593,000 for the
three months ended March 31, 2000. The increase in operating costs is
principally due to increased labor and related costs and an increase in repairs
and maintenance expenditures. Motel operating expenses as a percentage of motel
revenues decreased to 61.4% for the three months ended March 31, 2001 from 65.9%
for the three months ended March 31, 2000. Motel operating expenses as a
percentage of motel revenues for the motels owned in both periods increased to
61.2% for the three months ended March 31, 2001 from 57.4% for the three months
ended March 31, 2000.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to franchisors
and other related marketing expenses. Marketing and royalty fees decreased to
$743,000 for the three months ended March 31, 2001 from $1,055,000 for the three
months ended March 31, 2000, a decrease of $312,000 or 29.6%. The marketing and
royalty fees for motels owned during both periods increased to $735,000 for the
three months ended March 31, 2001 from $660,000 for the three months ended March
31, 2000, an increase of $75,000 or 11.4%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues increased
to 8.3% for the three months ended March 31, 2001 from 7.5% for the three months
ended March 31, 2000. The increase in marketing and royalty fees for motels
owned in both periods are principally due to an increase in royalty rates.
Marketing and royalty fees for motels acquired and divested since January 1,
2000 decreased to $8,000 for the three months ended March 31, 2001 from $395,000
for the three months ended March 31, 2000. Franchise fees declined due to the
leasing of properties to third parties.
Lease operations increased to $992,000 for the three months ended March
31, 2001 from $700,000 for the three months ended March 31, 2000, an increase of
$292,000, which results from an increase to 74 leased properties with an asset
value of $117,039,000 at March 31, 2001 compared with 60 leased properties with
an asset value of $97,082,000 at March 31, 2000.
Vending operations decreased to $128,000 for the three months ended
March 31, 2001 from $14,000 for the three months ended March 31, 1999, a
decrease of $114,000.
Corporate general and administrative expenses are segregated by the
Company into three separate areas: Management Company Operations,
Construction/Acquisition and Divestiture Division and Vending general and
administrative. Included in the Management Company Operations, which is the
division responsible for the motel operations, are the costs associated with
training, marketing, purchasing, administrative support, property related legal
and accounting costs. The major components of these costs are salaries, wages
and related expenses, travel, rent and other administrative expenses. The
general and administrative expenses for the Management Company Operations
increased $370,000 to $1,472,000 for the three months ended March 31, 2001 from
$1,102,000 for the three months ended March 31, 2000, an increase of 33.6%. The
general and administrative expenses associated with Construction/Acquisition and
Divestiture Division decreased $120,000 from $154,000 for the three months ended
March 31, 2000 to $34,000 for the three months ended March 31, 2001. Vending
General and Administrative expenses increased $162,000 to $280,000 for the three
months ended March 31, 2001 from $118,000 for the three months ended March 31,
2000. As a percentage of total motel operating revenues, Management Company
Operations general and administrative expenses was 14.9% for the three months
ended March 31, 2001 and 7.5% for the three months ended March 31, 2000.
Depreciation and amortization decreased to $3,626,000 for the three
months ended March 31, 2001 from $3,636,000 for the three months ended March 31,
2000, a net decrease of $10,000 or less than 1%.
Net operating income decreased to $900,000 for the three months ended
March 31, 2001 from $1,405,000 for the three months ended March 31, 2000, a
decrease of $505,000 or 35.9%. The decrease in net operating income included a
decrease of $867,000 in net motel revenues (motel revenues less motel operating
expenses and marketing and royalty fees). Of the $867,000 decrease in net motel
revenues, a decrease of $437,000 resulted from the motels owned during both
periods or a decrease of 12.5%. Net motel revenues for motels acquired and
divested since January 1, 2000 decreased $430,000. The remaining net increase is
a result of the increased leasing activities and the reduction of management
general and administrative expenses. Net operating income as a percent of total
revenues was 6.6% for the three months ended March 31, 2001 as compared to 8.1%
for the three months ended March 31, 2000.
Interest expense decreased to $5,241,000 for the three months ended
March 31, 2001 from $6,527,000 for the three months ended March 31, 2000, a
decrease of $1,286,000. The decrease in interest expense is reflective of the
lower average amount of outstanding borrowings during the first quarter of 2001
as compared to the first quarter 2000.
Net loss before the extraordinary item decreased to $2,643,000 for the
three months ended March 31, 2001 from $2,876,000 for the three months ended
March 31, 2000. Net loss including the extraordinary gain of $2,255,000 on the
extinguishment of a portion of the subordinated notes payable for the quarter
ended March 31, 2000 was $621,000 for the three months ended March 31, 2000
compared with $2,643,000 for the three months ended March 31, 2001.
Liquidity and Capital Resources
The Company's primary uses of its capital resources include debt
service, capital expenditures and working capital. In addition, on a
discretionary basis, the Company utilizes its capital resources for the
development and acquisition of motel properties.
The Company's debt service requirements consist of the obligation to
make interest and principal payments on its outstanding indebtedness.
In January through March 31, 2001 the Company was advanced
$1.8 million on loans of $10.5 million for construction advances on two
properties under construction.
In June 2001, the Company refinanced $3,997,000 of debt with
new loans of $3,425,000 at 8.84% due August 1, 2011, with monthly principal and
interest payments of $30,464 secured by two properties located in East Syracuse,
NY and Wilson, NC.
In July 2001, the Company borrowed $1,000,000 at prime plus
0.5% due June 12, 2002.
During April through July 31, 2001 the Company was advanced an
additional $1,469,000 toward the construction of it two properties under
construction.
In July 2001, the Company borrowed $3,500,000 at 8.67% due
September 1, 2011 with monthly principal and interest payments of $30,751
secured by one property in Milford, MA, which was used to pay off an existing
construction loan with a balance of $2,877,000.
In Octboer 2001, the Company repurchased an additional $1.9 million
of the 12% Senior Subordinated Notes from an affiliate at fair market value for
a pre-tax gain of $431,000.
The Company believes it has or will be able to obtain adequate
resources to meet its near-term maturing debt and other obligations.
The Company's capital expenditure requirements principally include
capital improvements and refurbishment of its lodging facilities as part of its
ongoing operating strategy to provide well-maintained facilities. The Company
made capital expenditures (exclusive of acquisitions and development of
properties) of $778,000 and $1,781,000 for the three months ended March 31, 2001
and 2000, respectively. In addition, as of March 31, 2001, the Company had
$574,000 of cash restricted for future refurbishment of motel properties, in
accordance with certain debt agreements. Management is not aware of any unusual
required level of future capital expenditures necessary to maintain its existing
properties.
For the three months ended March 31, 2001, cash and cash equivalents
increased $1,485,000. This increase consisted of $4,651,000 of funds provided by
investing activities and $5,270,000 of funds used by financing activities and
$2,104,000 of funds provided by operations. Net investing activities of
$4,651,000 include: $1,676,000 of cash utilized for motel development and
$778,000 expended on refurbishment of existing properties, offset by $6,304,000
of cash provided from the collections on mortgage and other notes receivable and
a change in cash restricted for refurbishment of $801,000. Cash used in
financing activities includes: $7,094,000 of cash utilized to repay indebtedness
and $1,824,000 from proceeds from notes payable.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings arising in the
ordinary course of business. The Company does not believe that any of these
actions, either individually or in the aggregate, will have a material adverse
effect on the Company's business, results of operations or financial condition.
See Note 5 of the Notes to the Condensed Consolidated Financial Statements.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Not Applicable
(b) Reports on Form 8-K:
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOA HOSPITALITY, INC.
February 28, 2001 By: /s/ Kurt M. Mueller
--------------------------
Kurt M. Mueller
President and Chief Financial Officer
February 28, 2001 By: /s/ Blane P. Evans
--------------------------
Blane P. Evans
Secretary and Treasurer