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, 2003.
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
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
[ ] Yes [X] No
Number of shares of Common Stock, $.01 par value outstanding as of
October 14, 2003: 800,000
INDEX TO FORM 10-Q
Page
Part I Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - June 30, 2003 2
(unaudited) and December 31, 2002.
Condensed consolidated statements of operations - 3
Three months ended June 30, 2003 and 2002 and
Six months ended June 30, 2003 and 2002 (unaudited).
Condensed consolidated statements of cash flows - 4
Six months ended June 30, 2003 and 2002 (unaudited).
Notes to condensed consolidated financial statements - 5
June 30, 2003 (unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General 9
Results of Operations 10
Liquidity and Capital Resources 16
Item 3. Controls and Procedures 17
Part II Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Certifications 20
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,
2003 2002
------------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,289 $ 3,200
Accounts receivable from property operations,net 2,399 1,731
Operating supplies and prepaid expenses 1,914 2,068
Current portion of mortgage and notes receivable 114 176
------------ ------------
Total Current Assets 8,716 7,175
Investment property:
Operating properties, net of accumulated depreciation 202,659 187,702
Land held for development 2,493 17,923
------------ ------------
Total investment property 205,152 205,625
Other Assets:
Deposits and other assets 5,156 4,463
Mortgage and other notes receivable, less current portion 17,855 18,046
Net deferred tax asset 2,705 2,029
Financing and other deferred costs, net of accumulated
amortization of $16,474 in 2003 and $14,900 in 2002 6,806 7,366
------------ ------------
Total Other Assets 32,522 31,904
------------ ------------
Total Assets $ 246,390 $ 244,704
============ ============
LIABILITIES, AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Trade accounts payable $ 3,668 $ 3,460
Real estate taxes payable 1,425 1,403
Accrued interest payable 3,771 2,670
Nonrefundable lease deposits and purchase price credits 26,594 25,946
Other liabilities for leased locations 6,697 5,017
Deferred income 5,355 5,395
Other accounts payable and accrued expenses 5,274 4,934
Current portion of long-term debt 38,983 21,296
12% Senior Subordinated Notes, net of unamortized
discount of $119,000 in 2003 and $154,000 in 2002 11,408 11,373
------------ ------------
Total Current Liabilities 103,175 81,494
Long-term debt, less current portion:
Mortgage and other notes payable 146,592 162,566
------------ ------------
Total Long-term debt, excluding current portion 146,592 162,566
------------ ------------
Total Liabilities 249,767 244,060
------------ ------------
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 (18,679) (14,658)
------------ ------------
Total Stockholders' Equity (Deficit) (3,377) 644
------------ ------------
Total Liabilities and Stockholders' Equity (Deficit) $ 246,390 $ 244,704
============ ============
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
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues:
Motel operating revenues $ 9,245 $ 10,319 $ 16,033 $ 18,150
Lease revenues 3,163 3,129 6,441 6,026
Vending revenues 1,305 1,014 2,505 1,856
Other revenues 482 711 940 1,318
---------- ---------- ---------- ----------
Total revenues 14,195 15,173 25,919 27,350
Costs and expenses:
Motel operating expenses 4,989 5,109 9,544 9,936
Marketing and royalty fees 655 711 1,137 1,271
General and administrative 1,593 1,623 3,048 3,185
Lease expenses 348 310 683 591
Vending expenses 1,480 882 2,889 1,569
Depreciation and amortization 3,019 3,009 5,961 6,017
---------- ---------- ---------- ----------
Total direct expenses 12,084 11,644 23,262 22,569
---------- ---------- ---------- ----------
Net operating income 2,111 3,529 2,657 4,781
Interest expense 4,515 4,655 8,871 9,279
---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income taxes (2,404) (1,126) (6,214) (4,498)
Income tax expense (benefit) (756) (464) (2,193) (1,750)
---------- ---------- ---------- ----------
Income (loss) from continuing operations (1,648) (662) (4,021) (2,748)
Discontinued operations - - - 43
---------- ---------- ---------- ----------
Net income (loss) $ (1,648) $ (662) $ (4,021) $ (2,705)
========== ========== ========== ==========
Income (loss) per common share
(basic and diluted):
Income (loss) from continuing operations $ (2.06) $ (0.83) $ (5.03) $ (3.43)
Income (loss) from discontinued operations - - $ - $ 0.05
---------- ---------- ---------- ----------
Net income (loss) $ (2.06) $ (0.83) $ (5.03) $ (3.38)
========== ========== ========== ==========
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
------------------------
2003 2002
---------- ----------
Cash flows provided by operating activities:
Net loss $ (4,021) $ (2,705)
Adjustments to reconcile net loss to cash provided by
(used in) operating activities:
Depreciation, amortization and accretion of
discount on notes 5,996 6,071
Deferred income taxes (676) 1,355
Tenant forfeiture of security deposits and purchase price credits (354) -
(Gain) loss on sale of properties - (147)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (668) (688)
Operating supplies, prepaid expenses,
deposits and other assets (138) (676)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 3,212 1,881
Accrued interest payable 1,101 720
---------- ----------
Net cash provided by operating activities 4,452 5,811
Cash flows provided by (used in) investing activities:
Acquisition and development of investment properties (1,340) (3,632)
Refurbishment of investment properties (2,575) (1,105)
Net proceeds from sale of investment properties - 3,319
Cash restricted for refurbishment of properties (400) (395)
Collections on mortgage and other notes receivable 253 3,044
---------- ----------
Net cash ( used in) provided by investing activities (4,062) 1,231
Cash flows provided by (used in) financing activities:
Proceeds from notes payable 6,921 2,673
Repayment of notes payable (5,208) (8,811)
Deferred financing costs (1,014) (233)
---------- ----------
Net cash provided by (used in) financing activities 699 (6,371)
---------- ----------
Net increase in cash and cash equivalents 1,089 671
Cash and cash equivalents at beginning of period 3,200 3,152
---------- ----------
Cash and cash equivalents at end of period $ 4,289 $ 3,823
========== ==========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 7,856 $ 8,583
========== ==========
See accompanying notes to condensed consolidated financial statements.
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(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 six-month period ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2003. 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, 2002. The terms "MOA" and
the "Company" mean MOA Hospitality, Inc. and its subsidiaries.
2. Divestitures and Leasing Activities
During the six months ended June 30, 3003, a property lessee defaulted
on the operating lease. The Company operated the property for one month. At that
time it was leased to a new third-party tenant.
Also subsequent to June 30, 2003 through September 30, 2003, the
Company has sold a total of 19 properties that were leased at June 30, 2003
resulting in a net gain of approximately $8,700,000. The total sales proceeds
approximated $30,819,000 of which approximately $21,230,000 was used to pay down
a new mortgage note as discussed in Note 8 Subsequent Events.
In accordance with SFAS 144 "Accounting for the Impairment or Disposal of
Long Lived Assets," effective for financial statements issued for fiscal years
beginning after December 31, 2001, operating results and gain/(loss) on sales of
real estate for properties sold subsequent to December 31, 2001 are reflected in
the consolidated statements of operations as discontinued operations for all
periods presented. Below is a summary of the results of operations of these
properties through their respective disposition dates:
For the Three Months Ended For the Six Months Ended
June 30 June 30
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
( in thousands ) ( in thousands )
Revenues
Motel operating revenues $ - $ - $ - $ 46
Lease revenues - - - 8
---------- ---------- ---------- ----------
Total revenues - - - 54
Costs and expenses:
Motel operating expenses - - - 80
Marketing and royalty fees - - - 9
Lease expenses - - - 1
Depreciation and amortization - - - 33
---------- ---------- ---------- ----------
Total direct expenses - - - 123
---------- ---------- ---------- ----------
Net operating income - - - (69)
Interest expense - - - 8
---------- ---------- ---------- ----------
Income (loss) from operations - - - (77)
Gain (loss) on sale of properties - - - 147
---------- ---------- ---------- ----------
Income (loss) before income taxes - - - 70
Income tax expense (benefit) - - - 27
---------- ---------- ---------- ----------
Income (loss) from discontinued
operations $ - $ - $ - $ 43
========== ========== ========== ==========
3. Mortgage and Other Notes Payable
In January through June 30, 2003 the Company was advanced $600,000 for
construction advances on one property under construction bringing the total
advanced to $7.0 million. The Company also borrowed an additional $5.0 million
during the first quarter of 2003. The note is secured by mortgages on five of
its properties and interest only is payable monthly until February 13, 2004 when
the entire balance is due.
Subsequent to June 30, 2003, the company refinanced the Mortgage note
payable that was due in 2005. See Note 8- Subsequent Events.
The Company is currently in default with respect to certain covenants
on its Senior Subordinated Notes and also a $8.4 million note. The Company is
seeking to extend the maturity dates and reduce the interest rates. The Company
does not have sufficient liquidity to repay the notes if demanded by the holders
and accordingly, there is substantial doubt about the Company's ability to
continue as a going concern. No adjustment to the consolidated financial
statements has been made to reflect this uncertainty.
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. Related Parties
During the quarters ended June 30, 2003 and 2002, the Company
received approximately $50,000 and $54,000 in management fees from related
parties. For the six months ended June 30, 2003 and 2002 the Company received
approximately $88,000 and $92,000 in management fees. The Company recognized
interest income from related parties during each of the quarters ended June 30,
2003 and 2002 of approximately $301,000. For the six months ended June 30, 2003
and 2002 interest from related parties totaled approximately $603,000,
respectively. Ground lease revenue from related parties for the six months ended
June 30, 2003 and 2002 totaled approximately $130,000 and $65,000, respectively.
Ground lease revenue from related parties for each of the quarters ended June
30, 2003 and 2002 totaled approximately $65,000. The Company had receivables
relating to these transactions from related parties of approximately $440,000
and $426,000 at June 30, 2003 and December 31, 2002 respectively.
7. Reclassifications
Certain reclassifications have been made to previously
reported 2002 statements in order to provide comparability with the 2003
statements reported herein. Theses reclassifications have not changed the 2001
results or stockholders' equity.
8. Subsequent Events
The Company though a subsidiary (LLC) has a mortgage note payable secured by 93
of LLC's motels, 24 of which are operated by the Company, and 69 that are leased
to third-party tenants. On February 28, 2003, the Company received a default
notice from the servicer of the loan ("Servicer") alleging that LLC's lease
program violated certain loan covenants. The Company believes that the leasing
program, which began in 1998, has been properly disclosed to the lender in both
monthly and annual financial reports provided to the lender. In addition, on
March 31, 2003, the Company was notified that the loan had been accelerated. The
Company disputes the validity of both the default and acceleration notices and
has been in negotiations with the Servicer to resolve these issues. In
conjunction with such continuing negotiations, the cure date was tolled and
extended by the Servicer through July 11, 2003. In July 2003, negotiations with
the Servicer stalled and on July 10th, LLC filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code. Subsequent to filing the
petition, LLC obtained a commitment to refinance the existing loan and the
Servicer agreed to such refinancing subject to a $2.5 million prepayment penalty
plus expenses, which will be recognized in the third quarter of 2003.
On August 26, 2003, the refinancing closed in the amount of $137.25 million. The
new loan bears interest at LIBOR plus 5% with a floor of 7.5%, matures September
13, 2008 and stipulates that aggregate net proceeds in excess of $2.5 million
from the sale of collateral properties must be applied as principal reductions
on the loan. The loan has a requirement for cumulative mandatory principal
reductions of $60 million by 9/13/2004, $90 million by 9/13/2005 and $112.25
million by 9/13/06. Additional payments of "Exit Interest" are required based on
the proceeds of each property sale (as defined). The exit interest ranges from
2.5% to 5% and is capped at $6.25 million.
The bankruptcy petition was dismissed by the court immediately prior to the
closing of the refinancing.
6. Segments
As of June 30, 2003 the Company, directly and through
subsidiaries, owned 108 lodging facilities in 33 states. The Company owns a 100%
interest in all of its properties. The Company operates thirty-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 Six months ended
June 30 June 30
------------------------ ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(in thousands) (in thousands)
Motel operations Motel operating revenues:
Room revenues $ 8,379 $ 9,420 $ 14,350 $ 16,372
Ancillary motel revenues 866 899 1,683 1,778
---------- ---------- ---------- ----------
Total motel operating revenues 9,245 10,319 16,033 18,150
Motel costs and expenses:
Motel operating expenses 4,989 5,109 9,544 9,936
Marketing and royalty fees 655 711 1,137 1,271
Depreciation and amortization 1,222 1,271 2,437 2,548
---------- ---------- ---------- ----------
Total motel direct expenses 6,866 7,091 13,118 13,755
---------- ---------- ---------- ----------
2,379 3,228 2,915 4,395
Lease operations:
Lease revenues 3,163 3,129 6,441 6,026
Lease expenses 348 310 683 591
Depreciation and amortization 1,380 1,534 2,771 3,080
---------- ---------- ---------- ----------
1,435 1,285 2,987 2,355
Vending operations:
Vending revenues 1,305 1,014 2,505 1,856
Vending expenses 1,480 882 2,889 1,569
Depreciation and amortization 197 139 383 283
---------- ---------- ---------- ----------
(372) (7) (767) 4
Corporate operations:
Other revenues 482 711 940 1,318
General and administrative expenses:
Management Company Operations 1,340 1,054 2,533 2,197
Construction/Acquisition and divestiture 83 88 180 92
Vending general and administrative 170 481 335 896
---------- ---------- ---------- ----------
Total general and administrative expenses 1,593 1,623 3,048 3,185
Depreciation and amortization 220 65 370 106
---------- ---------- ---------- ----------
(1,331) (977) (2,478) (1,973)
---------- ---------- ---------- ----------
Net operating income 2,111 3,529 2,657 4,781
Interest expense 4,515 4,655 8,871 9,279
---------- ---------- ---------- ----------
Income (loss) from continuing operations before income taxes (2,404) (1,126) (6,214) (4,498)
Income tax expense (benefit) (756) (464) (2,193) (1,750)
---------- ---------- ---------- ----------
Income (loss) from continuing operations (1,648) (662) (4,021) (2,748)
Discontinued operations (including net gain on disposal
of $147 in 2002), net of income taxes. - - - 43
---------- ---------- ---------- ----------
Net income (loss) $ (1,648) $ (662) $ (4,021) $ (2,705)
========== ========== ========== ==========
Total Assets:
Motel Operations $ 102,965 $ 107,014
Lease Operations 112,058 117,074
Other Operations 31,367 37,262
---------- ----------
$ 246,390 $ 261,350
========== ==========
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, 2003 AND 2002 HAVE
BEEN DERIVED FROM 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
ADR and occupancy throughout 2003 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 second quarter ADR decreased to $45.46 for 2003 versus $46.36 for 2002, and
occupancy decreased to 62.42% for 2003 versus 64.18% for 2002.
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, 2003 compared to the Three Months Ended
June 30, 2002
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 2002 numbers have been reclassified to conform to the 2003 presentation):
Supplemental Operating Results and Statistics
----------------------------------------------------------------------
(unaudited)
Three Months Ended June 30
----------------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures (6) Consolidated
---------------------- ---------------------- ----------------------
2003 2002 2003 2002 2003 2002
---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $ 7,576 $ 8,091 $ 803 $ 1,329 $ 8,379 $ 9,420
Ancillary motel revenues 817 831 49 68 866 899
---------- ---------- ---------- ---------- ---------- ----------
Total motel operating revenues 8,393 8,922 852 1,397 9,245 10,319
Motel costs and expenses:
Motel operating expenses 4,363 4,256 626 853 4,989 5,109
Marketing and royalty fees 567 596 88 115 655 711
Depreciation and amortization 1,147 1,172 75 99 1,222 1,271
---------- ---------- ---------- ---------- ---------- ----------
Total motel direct expenses 6,077 6,024 789 1,067 6,866 7,091
---------- ---------- ---------- ---------- ---------- ----------
$ 2,316 $ 2,898 $ 63 $ 330 2,379 3,228
========== ========== ========== ==========
Lease operations:
Lease revenues 3,163 3,129
Lease expenses 348 310
Depreciation and amortization 1,380 1,534
---------- ----------
1,435 1,285
Vending operations:
Vending revenues 1,305 1,014
Vending expenses 1,480 882
Depreciation and amortization 197 139
---------- ----------
(372) (7)
Corporate operations:
Other revenues, net 482 711
General and administrative expenses:
Management Company Operations 1,340 1,054
Construction/Acquisition
and Divestiture 83 88
Vending general and administrative 170 481
---------- ----------
Total general and administrative expenses 1,593 1,623
Depreciation and amortization 220 65
---------- ----------
(1,331) (977)
---------- ----------
Net operating income $ 2,111 $ 3,529
========== ==========
Other data:
Number of motels at period end (5) 29 29 5 4 34 33
Number of rooms at period end (5) 2,556 2,557 430 311 2,986 2,868
Occupancy percentage (5) 67.39% 70.68% 42.93% 77.99% 63.87% 70.71%
ADR (1) (5) $ 48.31 $ 49.18 $ 46.20 $ 57.76 $ 48.11 $ 50.19
REVPAR (2) (5) $ 36.07 $ 38.33 $ 20.96 $ 47.00 $ 33.89 $ 39.27
Net operating income margin (3) 14.87% 23.26%
Net motel revenue margin (4) (5) 45.71% 50.30% 17.19% 32.28% 42.98% 47.76%
- --------------------------------------------------
(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, 2003 and June 30, 2002, and for the three month periods then
ended, excludes amounts related to the seventy-four motels and
seventy-eight motels, respectively, which are leased to third party tenants.
(6) Includes newly aquired properties, newly leased properties and
properties which were leased that the Company is now operating.
Effective January 1, 2002 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 extends the reporting requirements of discontinued operations
to include components of an entity that have either been disposed of or are
classified as held for sale subsequent to December 31, 2001. For the three
months ended June 30, 2003 and 2002, the Company had no disposals of properties.
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 $14,195,000 for the three months ended June 30, 2003 from
$15,173,000 for the three months ended June 30, 2002, a decrease of $978,000 or
6.45% primarily as a result of the leasing and sales activities of the Company.
As lessor of 74 motels at June 30, 2003 the Company records rental income and
does not reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $9,245,000 for the three months ended June
30, 2003 from $10,319,000 for the three months ended June 30, 2002, a decrease
of $1,074,000 or 10.41%. The motel revenues for motels owned during both periods
decreased approximately $529,000, in addition there was a decrease of $545,000
in motel revenues for motels acquired and divested since April 1, 2003. Motel
revenues for motels owned during both periods decreased by 5.9%. The decrease in
motel revenues for motels owned during both periods was attributable principally
to a decrease in the occupancy. The occupancy percentage decreased from 70.68%
for the three months ended June 30, 2002 to 67.39% for the three months ended
June 30, 2003. The ADR for the motels owned during both periods decreased to
$48.31 for the three months ended June 30, 2003 from $49.18 for the three months
ended June 30, 2002, a decrease of $.87 or 1.8%. Revenue per available room
("REVPAR") for motels owned during both periods decreased to $36.07 for the
three months ended June 30, 2003 from $38.33 for the three months ended June 30,
2002, an decrease of $2.26 or 5.9%.
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 $4,989,000 for the three months
ended June 30, 2003 from $5,109,000 for the three months ended June 30, 2002, a
net decrease of $120,000 or 2.4%. Motel operating expenses for motels acquired
and divested since April 1, 2003 decreased to $626,000 for the three months
ended June 30, 2003 from $853,000 for the three months ended June 30, 2002, a
decrease of $227,000 or 26.6%. The cost of operating motels owned during both
periods increased to $4,363,000 for the three months ended June 30, 2003 from
$4,256,000 for the three months ended June 30, 2002. The increase in operating
costs is principally due to increased labor and related costs. Motel operating
expenses as a percentage of motel revenues increased to 54% for the three months
ended June 30, 2003 from 49.5% for the three months ended June 30, 2002. Motel
operating expenses as a percentage of motel revenues for the motels owned in
both periods increased to 52% for the three months ended June 30, 2003 from
47.7% for the three months ended June 30, 2002.
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
655,000 for the three months ended June 30, 2003 from $711,000 for the three
months ended June 30, 2002, a decrease of $56,000 or 7.88%. The marketing and
royalty fees for motels owned during both periods decreased to $567,000 for the
three months ended June 30, 2003 from $596,000 for the three months ended June
30, 2002, an decrease of $29,000 or 4.9%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues increased
to 7.5% for the three months ended June 30, 2003 from 7.4% for the three months
ended June 30, 2002. The decrease in marketing and royalty fees for motels owned
in both periods are principally due to less room revenues.
Lease operations increased to $1,435,000 for the three months ended
June 30, 2003 from $1,285,000 for the three months ended June 30, 2002, an
increase of $150,000. There are 74 leased properties with an asset value of
$112,058,000 at June 30, 2003 compared with 78 leased properties with an asset
value of $117,074,000 at June 30, 2002.
Vending operations loss increased to ($372,000) for the three months
ended June 30, 2003 from ($7,000) for the three months ended June 30, 2002. The
decrease of $365,000 is a result of additional spending to promote and acquire
new customers and also reclassifying of certain employees from management to
field operations.
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 $286,000 to $1,340,000 for the three months ended June 30, 2003 from
$1,054,000 for the three months ended June 30, 2002, a increase of 27.1%. The
general and administrative expenses associated with Construction/Acquisition and
Divestiture Division decreased $5,000 from $88,000 for the three months ended
June 30, 2002 to $83,000 for the three months ended June 30, 2003. Vending
general and administrative expenses decreased $311,000 to $170,000 for the three
months ended June 30, 2003 from $481,000 for the three months ended June 30,
2002. This decrease is attributed to the reclassifying of certain employees from
management to field operations. As a percentage of total motel operating
revenues, Management Company Operations general and administrative expenses were
14.5% for the three months ended June 30, 2003 and 10.2% for the three months
ended June 30, 2002.
Depreciation and amortization increased to $3,019,000 for the three
months ended June 30, 2003 from $3,009,000 for the three months ended June 30,
2002, a net increase of $10,000 or less than 1%.
Net operating income decreased to $2,111,000 for the three months ended
June 30, 2003 from $3,529,000 for the three months ended June 30, 2002, a
decrease of $1,418,000 or 40.2%. Net operating income as a percent of total
revenues was 14.9% for the three months ended June 30, 2003 as compared to 23.3%
for the three months ended June 30, 2002.
Interest expense decreased to $4,515,000 for the three months ended
June 30, 2003 from $4,655,000 for the three months ended June 30, 2002, a
decrease of $140,000. The decrease in interest expense is reflective of the
lower average amount of outstanding borrowings during the second quarter of 2003
as compared to the second quarter 2002.
Net Loss increased to a loss of $1,648,000 for the three months ended
June 30, 2003 from a net loss of $662,000 for the three months ended June 30,
2002.
Six Months Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002
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 2002 numbers have been reclassified to conform to the 2003 presentation):
Supplemental Operating Results and Statistics
---------------------------------------------------------------------------
(unaudited)
Six Months Ended June 30
---------------------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures (6) Consolidated
----------------------- ---------------------- -----------------------
2003 2002 2003 2002 2003 2002
---------- ---------- ---------- ---------- ---------- ----------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues $ 13,132 $ 13,775 $ 1,218 $ 2,597 $ 14,350 $ 16,372
Ancillary motel revenues 1,609 1,627 74 151 1,683 1,778
---------- ---------- ---------- ---------- ---------- ----------
Total motel operating revenues 14,741 15,402 1,292 2,748 16,033 18,150
Motel costs and expenses:
Motel operating expenses 8,524 8,167 1,020 1,769 9,544 9,936
Marketing and royalty fees 1,025 1,049 112 222 1,137 1,271
Depreciation and amortization 2,282 2,336 155 212 2,437 2,548
---------- ---------- ---------- ---------- ---------- ----------
Total motel direct expenses 11,831 11,552 1,287 2,203 13,118 13,755
---------- ---------- ---------- ---------- ---------- ----------
$ 2,910 $ 3,850 $ 5 $ 545 2,915 4,395
========== ========== ========== ==========
Lease operations:
Lease revenues 6,441 6,026
Lease expenses 683 591
Depreciation and amortization 2,771 3,080
---------- ----------
2,987 2,355
Vending operations:
Vending revenues 2,505 1,856
Vending expenses 2,889 1,569
Depreciation and amortization 383 283
---------- ----------
(767) 4
Corporate operations:
Other revenues, net 940 1,318
General and administrative expenses:
Management Company Operations 2,533 2,197
Construction/Acquisition
and Divestiture 180 92
Vending general and administrative 335 896
---------- ----------
Total general and administrative expenses 3,048 3,185
Depreciation and amortization 370 106
---------- ----------
(2,478) (1,973)
---------- ----------
Net operating income $ 2,657 $ 4,781
========== ==========
Other data:
Number of motels at period end (5) 29 29 5 4 34 33
Number of rooms at period end (5) 2,556 2,557 430 311 2,986 2,868
Occupancy percentage (5) 62.42% 64.18% 41.44% 72.39% 59.62% 65.08%
ADR (1) (5) $ 45.46 $ 46.36 $ 39.67 $ 54.86 $ 44.92 $ 47.43
REVPAR (2) (5) $ 31.85 $ 33.27 $ 17.38 $ 41.39 $ 29.92 $ 34.22
Net operating income margin (3) 10.25% 17.48%
Net motel revenue margin (4) (5) 39.54% 44.91% 13.14% 29.15% 37.30% 42.41%
- --------------------------------------------------
(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, 2003 and June 30, 2002, and for the three month periods then
ended, excludes amounts related to the seventy-four motels and
seventy-eight motels, respectively, which are leased to third party tenants.
(6) Includes newly aquired properties, newly leased properties and
properties which were leased that the Company is now operating.
Effective January 1, 2002 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting
for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses the
financial accounting and reporting for the impairment or disposal of long-lived
assets. SFAS 144 extends the reporting requirements of discontinued operations
to include components of an entity that have either been disposed of or are
classified as held for sale subsequent to December 31, 2001. For the six months
ended June 30, 2002, the Company disposed of three properties. The operating
results of theses properties have been reclassified as discontinued operations
in the unaudited consolidated statements of operations for each of the periods
included herein.
Total revenues decreased $1,431,000 to $25,919,000 for the six months
ended June 30, 2003 from $27,350,000 for the six months ended June 30, 2002 or
5.23% primarily as a result of the sales and leasing activities of the Company.
As lessor of 74 motels at June 30, 2003 the Company records rental income and
does not reflect the gross revenues and expenses of operating these motels.
Motel revenues decreased to $16,033,000 for the six months ended June
30, 2003 from $18,150,000 for the six months ended June 30, 2002, a decrease of
$2,117,000 or 11.66%. The motel room revenues for motels owned during both
periods decreased approximately $643,000 or 4.7%; there also was a decrease of
$1,379,000 for acquired and divested motels, since January 1, 2003. The ADR for
the motels owned during both periods decreased to $45.46 for the six months
ended June 30, 2003 from $46.36 for the six months ended June 30, 2002, a
decrease of $.90 or 1.9%. The occupancy percentage decreased from 64.18% for the
six months ended June 30, 2002 to 62.42% for the six months ended June 30, 2003.
The REVPAR for motels owned during both periods decreased to $31.85 for the six
months ended June 30, 2003 from $33.27 for the six months ended June 30, 2002, a
decrease of $1.42 or 4.3%.
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 $9,544,000 for the six months
ended June 30, 2003 from $9,936,000 for the six months ended June 30, 2002, a
decrease of $392,000 or 3.95%. The cost of operating motels owned during both
periods increased to $8,524,000 for the six months ended June 30, 2003 from
$8,167,000 for the six months ended June 30, 2002, an increase of $357,000 or
4.4%. Motel operating expenses for motels acquired and divested since January 1,
2003 decreased to $1,020,000 for the six months ended June 30, 2003 from
$1,769,000 for the six months ended June 30, 2002. The increase in operating
costs is principally due to increased labor and related costs. Motel operating
expenses as a percentage of motel revenues increased to 59.5% for the six months
ended June 30, 2003 from 54.7% for the six months ended June 30, 2002. Motel
operating expenses as a percentage of motel revenues for the motels owned in
both periods increased to 57.8% for the six months ended June 30, 2003 from
53.02% for the six months ended June 30, 2002.
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
$1,137,000 for the six months ended June 30, 2003 from $1,271,000 for the six
months ended June 30, 2002, a decrease of $134,000 or 10.5%. The marketing and
royalty fees for motels owned during both periods decreased to $1,025,000 for
the six months ended June 30, 2003 from $1,049,000 for the six months ended June
30, 2002, an decrease of $24,000 or 2.3%. For the motels owned during both
periods, marketing and royalty fees as a percentage of room revenues was 7.8%
for the six months ended June 30, 2003 and 7.6% for the six months ended June
30, 2002. Marketing and royalty fees for motels acquired and divested since
January 1, 2001 decreased to $112,000 for the six months ended June 30, 2003
from $222,000 for the six months ended June 30, 2002.
Lease operations increased to $2,987,000 for the six months ended June
30, 2003 from $2,355,000 for the six months ended June 30, 2002, an increase of
$632,000, the increase is principally due to higher lease revenue, forfeited
security deposits, and purchase price credits. There are 74 leased properties
with an asset value of $112,058,000 at June 30, 2003 compared with 78 leased
properties with an asset value of $117,074,000 at June 30, 2002.
Vending operations decreased to a loss of $767,000 for the six months
ended June 30, 2003 from income of $4,000 for the six months ended June 30,
2002. The decrease of $771,000 is a result of additional spending to promote and
acquire new customers and also reclassifying of certain employees from
management to field operations.
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 $336,000 to $2,533,000 for the six months ended
June 30, 2003 from $2,197,000 for the six months ended June 30, 2002, an
increase of 15.3%. The general and administrative expenses associated with
Construction and Development increased $88,000 from $92,000 for the six months
ended June 30, 2002 to $180,000 for the six months ended June 30, 2003. Vending
general and administrative expenses decreased $561,000 to $335,000 for the six
months ended June 30, 2003 from $896,000 for the six months ended June 30, 2002,
due to reclassifying of certain employees from management to field operations.
As a percentage of total motel operating revenues, Management Company Operations
general and administrative expenses were 15.8% for the six months ended June 30,
2003 and 12.1% for the six months ended June 30, 2002.
Depreciation and amortization decreased to $5,961,000 for the six
months ended June 30, 2003 from $6,017,000 for the six months ended June 30,
2002, a net decrease of $56,000 or 1%.
Net operating income decreased to $2,657,000 for the six months ended
June 30, 2003 from $4,781,000 for the six months ended June 30, 2002, a decrease
of $2,124,000 or 44.4%. This is a result of a decrease in motel operating
revenues and a higher loss from vending operations. Net operating income as a
percent of total revenues was 10.25% for the six months ended June 30, 2003 as
compared to 17.5% for the six months ended June 30, 2002.
Interest expense decreased to $8,871,000 for the six months ended June
30, 2003 from $9,279,000 for the six months ended June 30, 2002, a decrease of
$408,000. The decrease in interest expense is reflective of the lower average
amount of outstanding borrowings during the six months ending June 30, 2003 as
compared to the six months ending June 30, 2002.
Discontinued operations decreased to $0 for the six months ended June
30, 2003 compared to $43,000 for the six months ended June 30, 2002 as a result
of three properties that were sold in 2002. See Note 2 to the condensed
consolidated financial statements.
Net loss increased to $4,021,000 for the six months ended June 30, 2003
from a net loss of $2,705,000 for the six months ended June 30, 2002 primarily
as a result of a decrease in motel operating revenues and a higher loss from
vending operations.
Liquidity and Capital Resources
In January through June 30, 2003 the Company was advanced the remaining
..6 million on loans for construction advances on one property under construction
in Santa Monica, CA bringing the total advanced to $7.0 million.
The Company's capital expenditure requirements principally
include capital improvements and refurbishment of its lodging facilities as part
of its ongoing operating strategy to provide well-maintained facilities. The
Company made capital expenditures (exclusive of acquisitions and development of
properties) of $2,575,000 and $1,105,000 for the six months ended June 30, 2003
and 2002, respectively. In addition, as of June 30, 2003, the Company had
$1,195,000 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. Capital repairs and maintenance expenses on leased properties are
funded by lessees.
For the six months ended June 30, 2003, cash and cash equivalents
increased $1,089,000. This increase consisted of $4,062,000 of funds used in
investing activities and $699,000 of funds provided from financing activities
and $4,452,000 of funds provided by operations. Net investing activities of
$4,062,000 include: $1,340,000 of cash utilized for motel development,
$2,575,000 expended on refurbishment of existing properties, a change in cash
restricted for refurbishment of $400,000, offset by collections on mortgage and
other notes receivable of $253,000. Cash used in financing activities includes:
$5,208,000 of cash utilized to repay indebtedness; and $1,014,000 of cash used
for deferred financing costs and other items offset by $6,921,000 from proceeds
from notes payable.
The Company is currently in default with respect to certain covenants
on its Senior Subordinated Notes and also a $8.4 million note. The Company is
seeking to extend the maturity dates and reduce the interest rates. The Company
does not have sufficient liquidity to repay the notes if demanded by the holders
and accordingly, there is substantial doubt about the Company's ability to
continue as a going concern.
Subsequent to June 30, 2003, a subsidiary of the Company (the "LLC")
was placed in technical default on one of its loans and was forced to file for
Bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on
July 10, 2003. On August 26, 2003 the LLC refinanced the loan and the Bankruptcy
proceedings were dismissed. The Company believes that the refinancing will not
have any negative impact on the operations or liquidity in the future. See Note
8 to the condensed consolidated financial statements
Also subsequent to June 30, 2003 through September 30, 2003, the
Company has sold a total of 19 properties that were leased at March 31, 2003
resulting in a net gain of approximately $8,700,000. The total sales proceeds
approximated $30,819,000 of which approximately $21,230,000 was used to pay down
a new mortgage note. It is the Company's intent to continue to sell properties
in order to meet the mandatory principal reductions. See Note 8 to the condensed
consolidated financial statements.
Item 3. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our principal executive officer, Paul F. Wallace, and our principal
financial officer, Kurt M. Mueller, have evaluated as of the end of the period
covered by this report on Form 10-Q, the effectiveness of the design and
operation of our disclosure controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. As a result of this evaluation, these executive officers have concluded
that, as of such date, the design and operation of our disclosure controls and
procedures were effective.
Changes in Internal Controls
Since the date of the evaluation of our disclosure controls and
procedures by Mr. Wallace and Mr. Mueller described above, there have been no
significant changes in our internal controls or in other factors that could
significantly affect our disclosure controls and procedures.
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.
Subsequent to June 30, 2003, a subsidiary of the Company (the "LLC") was placed
in technical default on one of its loans and was forced to file for Bankruptcy
protection under Chapter 11 of the United States Bankruptcy Code on July 10,
2003. On August 26, 2003 the LLC refinanced the loan and the Bankruptcy
proceedings were dismissed.
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:
31.1 Certification of Chief Executive Officer under Section 302 of
Sarbanes Oxley Act of 2002.
31.2 Certification of Chief Financial Officer under Section 302 of
Sarbanes Oxley Act of 2002.
32.1 Certification of Chief Executive Officer under Section 906 of
Sarbanes Oxley Act of 2002.
32.2 Certification of Chief Financial Officer under Section 906 of
Sarbanes Oxley Act of 2002.
(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.
November 10, 2003 By:/s/ Kurt M. Mueller
-------------------------------------
Kurt M. Mueller
President and Chief Financial Officer
November 10, 2003 By:/s/ Blane P. Evans
-------------------------------------
Blane P. Evans
Secretary and Treasurer