UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
----------------------
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
March 14, 2002: 800,000
INDEX TO FORM 10-Q
Page
Part I Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - June 30, 2001 2
(unaudited) and December 31, 2000.
Condensed consolidated statements of operations - 3
Three months ended June 30, 2001 and 2000 and
Six months ended June 30, 2001 and 2000 (unaudited).
Condensed consolidated statements of cash flows - 4
Six months ended June 30, 2001 and 2000 (unaudited).
Notes to condensed consolidated financial statements - 5
June 30, 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 15
Part II Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
2001 2000
------------ ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 5,573 $ 4,230
Accounts receivable from property operations 1,945 1,537
Operating supplies and prepaid expenses 2,007 2,032
Current portion of mortgage and notes receivable 242 6,185
------------ ------------
Total Current Assets 9,767 13,984
Investment property:
Operating properties, net of accumulated depreciation 219,858 232,366
Land held for development 12,377 8,366
------------ ------------
Total investment property 232,235 240,732
Other Assets:
Deposits and other assets 2,427 2,399
Mortgage and other notes receivable, less current portion 19,880 19,403
Financing and other deferred costs, net of accumulated
amortization of $15,803 in 2001 and $14,413 in 2000 10,179 11,165
------------ ------------
Total Other Assets 32,486 32,967
------------ ------------
Total Assets $ 274,488 $ 287,683
============ ============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,103 $ 1,109
Real estate taxes payable 1,520 1,373
Accrued interest payable 1,752 2,003
Other accounts payable and accrued expenses 3,163 6,924
Other liabilities, including nonrefundable lease
deposits of $21,508 in 2001 and $19,597 in 2000 31,529 24,432
Current portion of long-term debt 34,057 28,519
------------ ------------
Total Current Liabilities 73,124 64,360
Net deferred tax liabilty 235 995
Long-term debt, less current portion:
Mortgage and other notes payable 175,865 192,902
12% Senior Subordinated Notes, net of unamortized
discount of $265,000 in 2001 and $351,000 in 2000 13,211 13,125
------------ ------------
Total Long-term debt, excluding current portion 189,076 206,027
------------ ------------
Total Liabilities 262,435 271,382
------------ ------------
Minority Interests - 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 (3,249) (1,015)
------------ ------------
Total Stockholders' Equity 12,053 14,287
------------ ------------
Total Liabilities and Stockholders' Equity $ 274,488 $ 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 Six Months Ended
June 30 June 30
-------------------------- --------------------------
2000 2001 2000 2001
----------- ----------- ----------- -----------
Revenues:
Motel operating revenues $ 12,322 $ 15,325 $ 22,192 $ 29,984
Lease revenues 2,817 2,618 5,748 4,512
Vending revenues 422 257 751 480
Other revenues 615 798 1,207 1,469
----------- ----------- ----------- -----------
Total revenues 16,176 18,998 29,898 36,445
Costs and expenses:
Motel operating expenses 6,542 8,105 12,598 17,771
Marketing and royalty fees 841 1,137 1,584 2,192
General and administrative 1,489 1,472 3,275 2,846
Lease expenses (52) 75 178 195
Vending expenses 443 233 824 423
Depreciation and amortization 3,601 3,523 7,227 7,159
----------- ----------- ----------- -----------
Total direct expenses 12,864 14,545 25,686 30,586
----------- ----------- ----------- -----------
Net operating income 3,312 4,453 4,212 5,859
Interest expense 5,268 6,318 10,509 12,845
----------- ----------- ----------- -----------
Loss from operations (1,956) (1,865) (6,297) (6,986)
Minority interests (33) 3 (20) 24
Gain on sale of properties 2,659 693 2,659 1,084
----------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary item 670 (1,169) (3,658) (5,878)
Income tax expense (benefit) 261 (455) (1,424) (2,288)
----------- ----------- ----------- -----------
Income (loss) before extraordinary item 409 (714) (2,234) (3,590)
Gain on early extinguishment of debt, net of
applicable income taxes of $1,437 - - - 2,255
----------- ----------- ----------- -----------
Net income (loss) $ 409 $ (714) $ (2,234) $ (1,335)
=========== =========== =========== ===========
Income (loss) per common share:
Loss before extraordinary item $ 0.51 $ (0.89) $ (2.79) $ (4.49)
Extraordinary item - - - 2.82
----------- ----------- ----------- -----------
Net income (loss) per common share (basic and diluted) $ 0.51 $ (0.89) $ (2.79) $ (1.67)
=========== =========== =========== ===========
Weighted average number of common shares outstanding 800,000 800,000 800,000 800,000
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
June 30
-------------------------
2001 2000
----------- -----------
Cash flows used in operating activities:
Net loss $ (2,234) $ (1,335)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation, amortization and accretion of discount on notes 7,313 7,227
Minority interests of others in net loss from operations 20 (24)
Deferred income taxes (760) 2,456
Gain on early extinguishment of debt - (3,692)
Gain on sale of properties (2,659) (1,084)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (408) 159
Operating supplies, prepaid expenses, deposits and other assets (1,164) (8,547)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,470 1,858
Accrued interest payable (251) 970
----------- -----------
Net cash provided by (used in) operating activities 2,327 (2,012)
Cash flows provided by (used in) investing activities:
Acquisition and development of investment properties (4,011) (1,096)
Refurbishment of investment properties (1,615) (2,706)
Net proceeds from sale of investment properties 2,903 7,241
Cash restricted for refurbishment of properties 860 (544)
Collections on mortgage and other notes receivable 12,616 2,858
----------- -----------
Net cash provided by investing activities 10,753 5,753
Cash flows provided by (used in) financing activities:
Proceeds from notes payable 8,411 11,979
Repayment of notes payable (19,909) (11,728)
Deferred financing costs (239) (764)
----------- -----------
Net cash used in financing activities (11,737) (513)
----------- -----------
Net increase in cash and cash equivalents 1,343 3,228
Cash and cash equivalents at beginning of period 4,230 4,422
----------- -----------
Cash and cash equivalents at end of period $ 5,573 $ 7,650
=========== ===========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 10,674 $ 11,768
=========== ===========
Cash paid (net of refunds received) during the period for income taxes $ 77 $ 159
=========== ===========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
(Unaudited)
1. Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
six-month period ended June 30, 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 part y operators under terms
similar to previous operating leases executed by the Company
Subsequent to December 31, 2001, the Company leased an additional two
and re-leased one of its lodging facilities to third party operators under terms
similar 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 a gain of $963,000
and the other to a related party at fair market value 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 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
facilities for approximately $2.2 million in cash for a loss of $696,000.
3. Mortgage and Other Notes Payable
In January through June 30, 2001 the Company was advanced $4.0 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 $461,000 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 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 of $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.
6. Segments
As of June 30, 2001 the Company, directly and through
subsidiaries, owned 115 lodging facilities in 39 states. The Company owns a 100%
interest in all of its properties. The Company operates forty of its motels and
leases seventy-five of its motels to third party tenants pursuant to operating
leases. The Company separately evaluates the performance of each of its motels.
Three months ended Six months ended
June 30 June 30
------------------------- --------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Motel operations:
Motel operating revenue:
Room revenues $ 11,161 $ 14,315 $ 20,159 $ 27,900
Ancillary motel revenues 1,161 1,010 2,033 2,084
---------- ---------- ---------- ----------
Total motel operating revenues 12,322 15,325 22,192 29,984
Motel costs and expenses:
Motel operating expenses 6,542 8,105 12,598 17,771
Marketing and royalty fees 841 1,137 1,584 2,192
Depreciation and amortization 1,633 1,981 3,280 4,323
---------- ---------- ---------- ----------
Total motel direct expenses 9,016 11,223 17,462 24,286
---------- ---------- ---------- ----------
3,306 4,102 4,730 5,698
Lease Operations
Lease revenues 2,817 2,618 5,748 4,512
Lease expenses (52) 75 178 195
Depreciation and amortization 1,692 1,312 3,422 2,376
---------- ---------- ---------- ----------
1,177 1,231 2,148 1,941
Vending Operations
Vending revenues 422 257 751 480
Vending expenses 443 233 824 423
Depreciation and amortization 86 49 162 96
---------- ---------- ---------- ----------
(107) (25) (235) (39)
Corporate Operations
Other revenues 615 798 1,207 1,469
General and administrative expenses:
Management Company Operations 1,086 1,159 2,557 2,260
Construction/Acquisition and Divestiture 107 224 141 379
Vending - general and administrative 296 89 577 207
---------- ---------- ---------- ----------
Total general and administrative expenses 1,489 1,472 3,275 2,846
Depreciation and amortization 190 181 363 364
---------- ---------- ---------- ----------
(1,064) (855) (2,431) (1,741)
Net operating income 3,312 4,453 4,212 5,859
Interest expense 5,268 6,318 10,509 12,845
---------- ---------- ---------- ----------
Loss from operations (1,956) (1,865) (6,297) (6,986)
Minority interests (33) 3 (20) 24
Gain on sale of properties 2,659 693 2,659 1,084
---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary item 670 (1,169) (3,658) (5,878)
Income tax expense (benefit) 261 (455) (1,424) (2,288)
---------- ---------- ---------- ----------
Income (loss) before extraordinary item 409 (714) (2,234) (3,590)
Gain on early extinguishment of debt - - - 2,255
---------- ---------- ---------- ----------
Net income (loss) $ 409 $ (714) $ (2,234) $ (1,335)
========== ========== ========== ==========
Total Assets:
Motel Operations $132,367 $ 161,416
Lease Operations 117,768 108,162
Corporate and other 24,353 44,109
--------- ----------
$274,488 $ 313,687
========= ==========
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 AND SIX MONTHS ENDED JUNE 30, 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 $38.69 and 70.2%,
respectively, for 2001 versus $38.94 and 71.03 % for 2000. For the period
subsequent to September 11, 2001 through November 30, 2001, RevPar and occupancy
have decreased to $39.36 and 69.23 %.
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 June 30, 2001 compared to the Three Months
Ended June 30, 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.
(certain of the 2000 numbers have been reclassified to conform to the 2001
presentation):
Supplemental Operating Results and Statistics
-------------------------------------------------------------------------
(unaudited)
Three Months Ended June 30
------------------------------------------------------------------------
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 $ 10,297 $ 10,375 $ 864 $ 3,940 $ 11,161 $ 14,315
Ancillary motel revenues 857 873 304 137 1,161 1,010
---------- ---------- ---------- ---------- ----------- -----------
Total motel operating revenues 11,154 11,248 1,168 4,077 12,322 15,325
Motel costs and expenses:
Motel operating expenses 5,562 5,327 980 2,778 6,542 8,105
Marketing and royalty fees 772 799 69 338 841 1,137
Depreciation and amortization 1,259 1,190 374 791 1,633 1,981
---------- ---------- ---------- ---------- ----------- -----------
Total motel direct expenses 7,593 7,316 1,423 3,907 9,016 11,223
---------- ---------- ---------- ---------- ----------- -----------
$ 3,561 $ 3,932 $ (255) $ 170 3,306 4,102
========== ========== ========== ==========
Lease operations:
Lease revenues 2,817 2,618
Lease expenses (52) 75
Depreciation and amortization 1,692 1,312
----------- -----------
1,177 1,231
Vending operations:
Vending revenues 422 257
Vending expenses 443 233
Depreciation and amortization 86 49
----------- -----------
(107) (25)
Corporate operations:
Other revenues, net 615 798
General and administrative expenses:
Management Company Operations 1,086 1,159
Construction/Acquisition
and Divestiture 107 224
Vending general and administrative 296 89
----------- -----------
Total general and administrative expenses 1,489 1,472
Depreciation and amortization 190 181
----------- -----------
(1,064) (855)
----------- -----------
Net operating income $ 3,312 $ 4,453
=========== ===========
Other data:
Number of motels at period end (5) 38 38 2 12 40 50
Number of rooms at period end (5) 3,153 3,159 196 1,145 3,349 4,304
Occupancy percentage (5) 71.24% 72.69% 63.19% 60.50% 70.71% 69.08%
ADR (1) (5) $ 48.43 $ 47.74 $ 37.91 $ 44.06 $ 47.81 $ 48.40
REVPAR (2) (5) $ 37.38 $ 37.62 $ 38.14 $ 31.91 $ 37.43 $ 35.81
Net operating income margin (3) 20.47% 23.44%
Net motel revenue margin (4) (5) 46.81% 49.37% 13.77% 24.39% 44.25% 42.49%
-----------------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total
number of rooms available.
(3) Net operating income margin represents net operating income divided by
total motel operating revenues plus lease revenues plus vending revenues
plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At June 30, 2001 and for the three months then ended, excludes amounts
related to the seventy-five 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 $16,176,000 for the three months ended June 30, 2001 from
$18,998,000 for the three months ended June 30, 2000, a decrease of $2,822,000
or 14.9% primarily as a result of the leasing activity of the Company. As lessor
of 75 motels at June 30, 2001 the Company records rental income and does not
reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $12,322,000 for the three months ended June
30, 2001 from $15,325,000 for the three months ended June 30, 2000, a decrease
of $3,003,000 or 19.6%. The motel revenues for motels owned during both periods
decreased approximately $94,000, in addition there was a decrease of $2,909,000
in motel revenues for motels acquired and divested since April 1, 2000. Motel
revenues for motels owned during both periods decreased by less than 1.0%. The
decrease in motel revenues for motels owned during both periods was attributable
principally to a decrease in the occupancy. The ADR for the motels owned during
both periods increased to $48.43 for the three months ended June 30, 2001 from
$47.74 for the three months ended June 30, 2000, an increase of $.69 or 1.4%.
Revenue per available room ("REVPAR") for motels owned during both periods
decreased to $37.38 for the three months ended June 30, 2001 from $37.62 for the
three months ended June 30, 2000, a decrease of $0.24 or .01%. The acquired and
divested motels had an occupancy percentage of 63.19%, an ADR of $37.91 and
REVPAR of $38.14 for the three months ended June 30, 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 $6,542,000 for the three months
ended June 30, 2001 from $8,105,000 for the three months ended June 30, 2000, a
net decrease of $1,563,000 or 19.3%. Motel operating expenses for motels
acquired and divested since April 1, 2000 decreased to $980,000 for the three
months ended June 30, 2001 from $2,778,000 for the three months ended June 30,
2000, a decrease of $1,798,000 or 64.7%. The decrease was partially offset by an
increase of $235,000 or 4.4% in the costs of operating the motels owned during
both periods. The cost of operating motels owned during both periods increased
to $5,562,000 for the three months ended June 30, 2001 from $5,327,000 for the
three months ended June 30, 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 were held to 53.1% for the three months ended June 30, 2001 from 52.9%
for the three months ended June 30, 2000. Motel operating expenses as a
percentage of motel revenues for the motels owned in both periods increased to
49.9% for the three months ended June 30, 2001 from 47.4% for the three months
ended June 30, 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
$841,000 for the three months ended June 30, 2001 from $1,137,000 for the three
months ended June 30, 2000, a decrease of $296,000 or 26.0%. The marketing and
royalty fees for motels owned during both periods decreased to $772,000 for the
three months ended June 30, 2001 from $799,000 for the three months ended June
30, 2000, a decrease of $27,000 or 3.4%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues decreased
to 6.9% for the three months ended June 30, 2001 from 7.1% for the three months
ended June 30, 2000. The decrease in marketing and royalty fees for motels owned
in both periods are principally due to less room revenues.
Lease operations decreased to $1,177,000 for the three months ended
June 30, 2001 from $1,231,000 for the three months ended June 30, 2000, a
decrease of $54,000.There were 69 leased properties with an asset value of
$108,162,000 at June 30, 2000 compared with 75 leased properties with an asset
value of $117,768,000 at June 30, 2001.
Vending operations increased to ($107,000) for the three months ended
June 30, 2001 from ($25,000) for the three months ended June 30, 2000, an
increase of $82,000.
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
decreased $73,000 to $1,086,000 for the three months ended June 30, 2001 from
$1,159,000 for the three months ended June 30, 2000, a decrease of 6.3%. The
general and administrative expenses associated with Construction/Acquisition and
Divestiture Division decreased $117,000 from $224,000 for the three months ended
June 30, 2000 to $107,000 for the three months ended June 30, 2001. Vending
general and administrative expenses increased $207,000 to $296,000 for the three
months ended June 30, 2001 from $89,000 for the three months ended June 30,
2000, primarily due to the increased personnel in preparation of expansion. As a
percentage of total motel operating revenues, Management Company Operations
general and administrative expenses were 8.7% for the three months ended June
30, 2001 and 7.6% for the three months ended June 30, 2000.
Depreciation and amortization increased to $3,601,000 for the three
months ended June 30, 2001 from $3,523,000 for the three months ended June 30,
2000, a net increase of $78,000 or 2.2%. .
Net operating income decreased to $3,312,000 for the three months ended
June 30, 2001 from $4,453,000 for the three months ended June 30, 2000, a
decrease of $1,141,000 or 25.6%. Net operating income as a percent of total
revenues was 20.5% for the three months ended June 30, 2001 as compared to 23.4%
for the three months ended June 30, 2000.
Interest expense decreased to $5,268,000 for the three months ended
June 30, 2001 from $6,318,000 for the three months ended June 30, 2000, a
decrease of $1,050,000. The decrease in interest expense is reflective of the
lower average amount of outstanding borrowings during the second quarter of 2001
as compared to the second quarter 2000.
Gain on sale of properties amounted to $693,000 for the three months
ended June 30, 2000 compared to $2,659,000 for the respective period in 2001. In
four unrelated transactions, three properties were sold for $6.2 million in cash
and $2.5 million in notes receivable and a vacant parcel of land was sold for
cost during the quarter ending June 30, 2000. For the quarter ended June 30,
2001, one property was sold for $3.6 million in cash and one other property
recognized a deferred gain of $1.7 million.
Net income increased to $409,000 for the three months ended June 30,
2001 from a net loss of $714,000 for the three months ended June 30, 2000.
Six Months Ended June 30, 2001 Compared to the Six Months Ended June 30, 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.
(certain of the 2000 numbers have been reclassified to conform to the 2001
presentation):
Supplemental Operating Results and Statistics
-------------------------------------------------------------------
(unaudited)
Six Months Ended June 30
-------------------------------------------------------------------
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 $ 18,120 $ 18,123 $ 2,039 $ 9,777 $ 20,159 $ 27,900
Ancillary motel revenues 1,698 1,747 335 337 2,033 2,084
--------- --------- --------- --------- --------- ---------
Total motel operating revenues 19,818 19,870 2,374 10,114 22,192 29,984
Motel costs and expenses:
Motel operating expenses 10,841 10,248 1,757 7,523 12,598 17,771
Marketing and royalty fees 1,419 1,376 165 816 1,584 2,192
Depreciation and amortization 2,520 2,370 760 1,953 3,280 4,323
--------- --------- --------- --------- --------- ---------
Total motel direct expenses 14,780 13,994 2,682 10,292 17,462 24,286
--------- --------- --------- --------- --------- ---------
$ 5,038 $ 5,876 $ (308) $ (178) 4,730 5,698
========= ========= ========= =========
Lease operations:
Lease revenues 5,748 4,512
Lease expenses 178 195
Depreciation and amortization 3,422 2,376
--------- ---------
2,148 1,941
Vending operations:
Vending revenues 751 480
Vending expenses 824 423
Depreciation and amortization 162 96
--------- ---------
(235) (39)
Corporate operations:
Other revenues, net 1,207 1,469
General and administrative expenses:
Management Company Operations 2,557 2,260
Construction/Acquisition
and Divestiture 141 379
Vending general and administrative 577 207
--------- ---------
Total general and administrative expenses 3,275 2,846
Depreciation and amortization 363 364
--------- ---------
(2,431) (1,741)
--------- ---------
Net operating income $ 4,212 $ 5,859
========= =========
Other data:
Number of motels at period end (5) 38 38 2 13 40 51
Number of rooms at period end (5) 3,153 3,159 196 1,332 3,349 4,491
Occupancy percentage (5) 66.67% 66.89% 60.04% 55.41% 66.26% 63.74%
ADR (1) (5) $ 47.61 $ 47.11 $ 36.88 $ 45.42 $ 47.01 $ 46.25
REVPAR (2) (5) $ 34.71 $ 34.55 $ 23.98 $ 26.04 $ 34.05 $ 36.68
Net operating income margin (3) 14.09% 16.08%
Net motel revenue margin (4) (5) 41.71% 45.50% 22.17% 18.15% 39.73% 35.92%
------------------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total
number of rooms available.
(3) Net operating income margin represents net operating income divided by
total motel operating revenues plus lease revenues plus vending revenues
plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At June 30, 2001 and for the six months then ended, excludes amounts
related to the seventy-five motels which are leased to third party tenants.
Total revenues decreased $6,547,000 to $29,898,000 for the six months
ended June 30, 2001 from $36,445,000 for the six months ended June 30, 2000 or
18.0% primarily as a result of the leasing activity of the Company. As lessor of
75 motels at June 30, 2001 the Company records rental income and does not
reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $22,192,000 for the six months ended June
30, 2001 from $29,984,000 for the six months ended June 30, 2000, a decrease of
$7,792,000 or 26.0%. The motel room revenues for motels owned during both
periods decreased approximately $3,000 or less than 1%, there also was a
decrease of $7,738,000 for acquired and divested motels, since January 1, 2000.
The ADR for the motels owned during both periods increased to $47.61 for the six
months ended June 30, 2001 from $47.11 for the six months ended June 30, 2000,
an increase of $.50 or 1.1%. The occupancy percentage decreased from 66.89% for
the six months ended June 30, 2000 to 66.67% for the six months ended June 30,
2001. The REVPAR for motels owned during both periods increased to $34.71 for
the six months ended June 30, 2001 from $34.55 for the six months ended June 30,
2000, an increase of $.16 or less than 1%.
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 $12,598,000 for the six months
ended June 30, 2001 from $17,771,000 for the six months ended June 30, 2000, a
net decrease of $5,173,000 or 29.1%. The cost of operating motels owned during
both periods increased to $10,841,000 for the six months ended June 30, 2001
from $10,248,000 for the six months ended June 30, 2000, an increase of $593,000
or 5.8%. Motel operating expenses for motels acquired and divested since January
1, 2000 decreased to $1,757,000 for the six months ended June 30, 2001 from
$7,523,000 for the six months ended June 30, 2000. Motel operating expenses as a
percentage of motel revenues decreased to 56.8% for the six months ended June
30, 2001 from 59.3% for the six months ended June 30, 2000. Motel operating
expenses as a percentage of motel revenues for the motels owned in both periods
increased to 54.7% for the six months ended June 30, 2001 from 51.6.% for the
six months ended June 30, 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
$1,584,000 for the six months ended June 30, 2001 from $2,192,000 for the six
months ended June 30, 2000, a decrease of $608,000 or 27.7%. The marketing and
royalty fees for motels owned during both periods increased to $1,419,000 for
the six months ended June 30, 2001 from $1,376,000 for the six months ended June
30, 2000, an increase of $43,000 or 3.1%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues increased
to 7.8% for the six months ended June 30, 2001 from 7.6% for the six months
ended June 30, 2000, an increase of 2.6%. The decrease in marketing and royalty
fees is attributable to a reduction in franchise fees due to the decline in room
revenues on which most such fees are based and a reduction in rates for certain
contractual franchise fees due to the number of motels either sold or leased
subsequent to June 30, 2000. Marketing and royalty fees for motels acquired and
divested since January 1, 2000 decreased to $165,000 for the six months ended
June 30, 2001 from $816,000 for the six months ended June 30, 2000.
Lease operations increased to $2,148,000 for the six months ended June
30, 2001 from $1,941,000 for the six months ended June 30, 2000, an increase of
$207,000, which results from an increase to 75 leased properties with an asset
value of $117,768,000 at June 30, 2001 compared with 69 leased properties with
an asset value of $108,162,000 at June 30, 2000.
Vending operations increased to ($233,000) for the six months ended
June 30, 2001 from ($39,000) for the six months ended June 30, 2000, an increase
of $194,000.
Corporate general and administrative expenses are segregated by the
Company into three separate areas: Management Company Operations, Construction
and Development and Vending general and administrative. Included in the
Management Company Operations, which is the division responsible for the motel
operations, are the costs associated with training, marketing, purchasing,
administrative support, property related legal and accounting costs. The major
components of these costs are salaries, wages and related expenses, travel, rent
and other administrative expenses. The general and administrative expenses for
the Management Operations increased $297,000 to $2,557,000 for the six months
ended June 30, 2001 from $2,260,000 for the six months ended June 30, 2000, an
increase of 13.1%. This is due primarily to discounts given on notes receivable
paid off during the first six months of 2001. The general and administrative
expenses associated with Construction and Development decreased $238,000 from
$379,000 for the six months ended June 30, 2000 to $141,000 for the six months
ended June 30, 2001. Vending general and administrative expenses increased
$370,000 to $577,000 for the six months ended June 30, 2001 from $207,000 for
the six months ended June 30, 2000. As a percentage of total motel operating
revenues, Management Operations general and administrative expenses was 11.4%
for the six months ended June 30, 2001 and 7.5% for the six months ended June
30, 2000.
Depreciation and amortization increased to $7,227,000 for the six
months ended June 30, 2001 from $7,159,000 for the three months ended June 30,
2000, a net increase of $68,000 or 1.0%.
Net operating income decreased to $4,212,000 for the six months ended
June 30, 2001 from $5,859,000 for the six months ended June 30, 2000, a decrease
of $1,647,000 or 28.1%. This is a result of an increase in management company
operations expenses of $297,000 and in an increase of $370,000 in vending G&A
and a reduction in revenues. Net operating income as a percent of total revenues
was 14.1% for the six months ended June 30, 2001 as compared to 16.1% for the
six months ended June 30, 2000.
Interest expense decreased to $10,509,000 for the six months ended June
30, 2001 from $12,845,000 for the six months ended June 30, 2000, a decrease of
$2,336,000. The decrease in interest expense is reflective of the lower average
amount of outstanding borrowings during the six months ending June 30, 2001 as
compared to the six months ending June 30, 2000.
Gain on sale of properties amounted to $2,659,000 for the six months
ended June 30, 2001 compared to $1,084,000 for the period ended June 30, 2000.
In six unrelated transactions, six properties were sold for $7.9 million in cash
and $6.5 million in notes receivable, also a vacant parcel of land was sold for
cost during the six months ended June 30, 2000. For the six months ended June
30, 2001, one property was sold for $3.6 million in cash and one other property
recognized a deferred gain of $1.7 million.
Net loss increased to $2,234,000 for the six months ended June 30, 2001
from a net loss of $1,335,000 for the six months ended June 30, 2000 primarily
as a result of a decrease of $1,647,000 in net operating income.
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 June 30, 2001 the Company was advanced $4.0
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 $461,000 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 of $431,000.
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 $1,615,000 and $2,706,000 for the six months ended June 30, 2001
and 2000, respectively. In addition, as of June 30, 2001, the Company had
$860,000 of cash restricted for future refurbishment of motel properties, in
accordance with certain debt agreements. Management is not aware of any unusual
required level of future capital expenditures necessary to maintain its existing
properties.
For the six months ended June 30, 2001, cash and cash equivalents
increased $1,343,000. This increase consisted of $10,753,000 of funds provided
by investing activities and $11,737,000 of funds used in financing activities
and $2,327,000 of funds provided by operations. Net investing activities of
$10,753,000 include: $4,011,000 of cash utilized for motel development and
$1,615,000 expended on refurbishment of existing properties, offset by
$15,519,000 of cash provided from the sale of investment properties and
collections on mortgage and other notes receivable and a change in cash
restricted for refurbishment of $860,000. Cash used in financing activities
includes: $19,909,000 of cash utilized to repay indebtedness; and $239,000 of
cash used for deferred financing costs and other items offset by $8,411,000 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.
March 14, 2002 By: /s/ Kurt M. Mueller
----------------------
Kurt M. Mueller
President and Chief Financial Officer
March 14, 2002 By: /s/ Blane P. Evans
----------------------
Blane P. Evans
Secretary and Treasurer