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, 1996.
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
______________________
MOTELS OF AMERICA, 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
[X] Yes [ ] No
Number of shares of Common Stock, $.01 par value outstanding as
of August 9, 1996: 800,000
INDEX
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
Part I - Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets - June 30, 1996 (unaudited)
and December 31, 1995 ............................................ 2
Condensed consolidated statements of operations - Three months
ended June 30, 1996 and 1995 (unaudited); Six months ended
June 30, 1996 and 1995 (unaudited) ............................... 3
Condensed consolidated statements of cash flows - Six months
ended June 30, 1996 and 1995 (unaudited) ......................... 4
Notes to condensed consolidated financial statements -
June 30, 1996 (unaudited) ........................................ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General .......................................................... 6
Results of Operations ............................................ 8
Liquidity and Capital Resources .................................. 13
Part II - Other Information
Item 1. Legal Proceedings ........................................ 15
Item 2. Changes in Securities .................................... 15
Item 3. Defaults upon Senior Securities .......................... 15
Item 4. Submission of Matters to a Vote of Security Holders ...... 15
Item 5. Other Information ........................................ 15
Item 6. Exhibits and Reports on Form 8-K ......................... 15
Signatures ........................................................ 16
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, December 31,
1996 1995
---------- -----------
(Unaudited)
ASSETS
Cash and cash equivalents ............................... $ 9,367 $ 13,897
Restricted cash ......................................... 1,946 2,162
Accounts receivable from property operations ............ 4,749 2,808
Operating supplies and prepaid expenses ................. 2,860 3,349
Deposits and other assets ............................... 5,203 2,893
Mortgage and other notes receivable ..................... 3,493 2,788
Investment property:
Operating properties, net of accumulated depreciation
of $56,898 in 1996 and $51,075 in 1995 .............. 321,941 278,281
Land held for development ............................. 4,046 4,046
---------- -----------
Total investment property ............................... 325,987 282,327
Financing and other deferred costs, net of accumulated
amortization of $3,062 in 1996 and $2,127 in 1995 ..... 14,218 14,927
Deferred tax asset ...................................... 2,177 2,210
---------- -----------
$ 370,000 $ 327,361
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable .................................. $ 2,891 $ 1,554
Real estate taxes payable ............................... 2,762 1,963
Accrued interest payable ................................ 3,625 3,145
Other accounts payable and accrued expenses ............. 6,450 4,078
Deferred tax liability .................................. 6,480 6,376
Secured notes payable:
Line of credit ........................................ 29,752 -
Mortgage and other notes .............................. 218,574 209,972
--------- ----------
Total secured notes payable ............................. 248,326 209,972
12% Senior Subordinated Notes, net of unamortized
discount of $3,744 in 1996 and $3,885 in 1995 ......... 76,256 76,115
--------- ----------
Total liabilities ....................................... 346,790 303,203
Minority interests ...................................... 1,907 1,879
Stockholders' equity:
Common stock, $.01 par value, 1,500,000 shares
authorized, 800,000 shares issued and outstanding ... 8 8
Additional paid-in capital ............................ 15,294 15,294
Retained earnings ..................................... 6,001 6,977
--------- -----------
Total stockholders' equity .............................. 21,303 22,279
--------- -----------
$ 370,000 $ 327,361
========= ===========
See accompanying notes to condensed consolidated financial statements.
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except share data)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
Revenues:
Motel operating revenues ............. $ 34,861 $ 29,909 $ 62,110 $ 53,539
Other revenues ....................... 59 161 142 277
-------- -------- -------- --------
Total revenues ......................... 34,920 30,070 62,252 53,816
Costs and expenses:
Motel operating expenses ............. 17,951 14,236 33,577 28,019
Marketing and royalty fees ........... 2,587 2,050 4,588 3,672
General and administrative ........... 1,566 1,424 3,095 2,897
Depreciation and amortization ........ 3,587 3,186 6,883 6,270
Net gain on sale of properties ....... (102) - (102) -
-------- -------- -------- --------
Total direct expenses .................. 25,589 20,896 48,041 40,858
-------- -------- -------- --------
Net operating revenue .................. 9,331 9,174 14,211 12,958
Interest expense ....................... 7,939 7,181 15,600 13,821
-------- -------- -------- --------
Net income (loss) from operations ...... 1,392 1,993 (1,389) (863)
Minority interests of others in
net income (loss) from operations .... (134) (169) (185) (182)
-------- -------- -------- --------
Net income (loss) before income taxes .. 1,258 1,824 (1,574) (1,045)
Income tax expense (credit) ............ 501 728 (598) (389)
-------- -------- -------- --------
Net income (loss) ...................... $ 757 $ 1,096 $ (976) $ (656)
======== ======== ======== ========
Net income (loss) per common share ..... $ 0.95 $ 1.37 $ (1.22) $ (0.82)
======== ======== ======== ========
Weighted average number of
common shares outstanding ............ 800,000 800,000 800,000 800,000
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
June 30
--------------------
1996 1995
-------- --------
Cash flows provided by (used in) operating activities:
Net loss ............................................. $ (976) $ (656)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation, amortization and accretion of
discount on notes ............................... 7,025 6,395
Minority interests of others in net loss
from operations ................................. 185 182
Deferred income taxes ............................ 138 (372)
Net gain on sale of properties ................... (102) -
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable ........................... (1,834) (930)
Operating supplies, prepaid expenses,
deposits and other assets ................... (903) (1,843)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ........ 3,587 584
Accrued interest payable ..................... 480 5
-------- --------
Net cash provided by operating activities .............. 7,600 3,365
Cash flows provided by (used in) investing activities:
Acquisition and development of investment properties . (46,873) (3,090)
Refurbishment of investment properties ............... (4,564) (3,564)
Proceeds from sale of investment properties .......... 1,349 -
Cash restricted for refurbishment of properties ...... 216 (61)
Collections on mortgage and other notes receivable ... 45 36
-------- --------
Net cash used in investing activities .................. (49,827) (6,679)
Cash flows provided by (used in) financing activities:
Proceeds from secured notes payable .................. 41,659 10,000
Repayment of secured notes payable ................... (3,434) (2,679)
Distributions to minority interests .................. (157) (257)
Deferred financing costs ............................. (371) (1,563)
-------- ---------
Net cash provided by (used in) financing activities .... 37,697 5,501
-------- ---------
Net increase (decrease) in cash and cash equivalents ... (4,530) 2,187
Cash and cash equivalents at beginning of period ....... 13,897 8,488
-------- ---------
Cash and cash equivalents at end of period ............. $ 9,367 $ 10,675
======== =========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest ............. $ 14,978 $ 13,691
======== =========
Cash paid (net of refunds received) during the period
for income taxes ................................... $ 92 $ 158
======== =========
See accompanying notes to condensed consolidated financial statements.
MOTELS OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
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 three-month and six-month periods ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. For further information, refer to the consolidated financial statements
and footnotes thereto included in Motels of America, Inc. and Subsidiaries'
Annual Report on Form 10-K for the year ended December 31, 1995. The terms
"MOA" and the "Company" mean Motels of America, Inc. and its subsidiaries.
2. Divestitures
In May and June 1996, the Company sold two motel properties (including
the land underlying the properties) to unaffiliated parties for approximately
$1.3 million in cash and notes receivable of $750,000. The notes receivable
are collateralized by the motel properties, bear interest at 9% and provide
for monthly principal and interest receipts through 2011, although the notes
are callable prior to their due dates. Prior to the sale of one of the
properties, the Company purchased the land underlying the property for
$697,000. In conjunction with the sales, the Company recorded a net gain of
approximately $102,000. Under terms of MOA's $100 million secured line of
credit facility (the "line of credit") entered into with Nomura Asset Capital
Corporation, the Company utilized approximately $1,187,000 of proceeds from
the sale of one of the motel properties to repay a portion of the line of
credit.
In June of 1996, the Company leased one of its motel properties to an
unaffiliated party with the intent to sell the property to the lessee prior to
September 30, 1996. The lease provides for a monthly rental amount based on a
percentage of room revenue.
In August of 1996, the Company sold a motel property (including the
land underlying the property) to an unaffiliated party for approximately
$100,000 in cash and a note receivable of $400,000. The note receivable is
collateralized by the motel property, bears interest at 9% and provides for
monthly principal and interest receipts through 2011, although the note is
callable prior to its due date. Prior to the sale of the property, the
Company purchased the land underlying the property for $425,000.
3. 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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM
CONDENSED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE
NOTES THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL
OPERATING RESULTS PRESENTED BELOW FOR THE THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1996 AND 1995 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.
Between January 1, 1995 and June 30, 1996, the Company has acquired and
sold a number of motels in various transactions summarized as follows:
Number of
Date Transaction Rooms
-------------- ------------------------------- -----------
September and
December 1995 Purchased two motels located in 250
Chattanooga, TN and Indio, CA.
December 1995 Sold two motels located in (260)
Charlotte, NC and Augusta, GA.
January 1996 Purchased nineteen motels 1,794
located in the eastern half
of the United States from
Forte USA, Inc.
January through
March 1996 Purchased two motels located in 201
Newark, DE and Red Wing, MN.
Also purchased the land
underlying one of its existing
properties.
May 1996 Sold a motel located in (102)
Newport, KY.
June 1996 Sold a motel located in (60)
Waukegan, IL.
------
1,823
======
In the aggregate, the Company expended $43.1 million in cash (net of
proceeds from sales of $5.4 million) in conjunction with the above listed
transactions. Cash was funded from internal sources and $42.7 million in
borrowings.
The above listed acquisitions have been accounted for under the
purchase method of accounting and therefore results from operations have been
included only since the date of acquisition.
Results of Operations
The following discussion and analysis address results of operations for
the three months ended June 30, 1996 and 1995.
Three Months Ended June 30, 1996 Compared to the Three Months Ended
June 30, 1995
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
interim condensed consolidated financial statements presented elsewhere.
Supplemental Operating Results and Statistics
--------------------------------------------------------
(unaudited)
Three Months Ended June 30
--------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
----------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995
------- ------- ------- ------- ------- -------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues ...................... $27,616 $27,472 $5,046 $430 $32,662 $27,902
Ancillary motel revenues ........... 1,985 1,973 214 34 2,199 2,007
------- ------- ------ ---- ------- -------
Total motel operating revenues ... 29,601 29,445 5,260 464 34,861 29,909
Motel costs and expenses:
Motel operating expenses ........... 14,739 13,936 3,212 300 17,951 14,236
Marketing and royalty fees ......... 2,079 2,020 508 30 2,587 2,050
Depreciation and amortization ...... 2,987 2,567 395 41 3,382 2,608
Net gain on sale of properties ..... - - (102) - (102) -
------- ------- ------ ---- ------- -------
Total motel direct expenses ...... 19,805 18,523 4,013 371 23,818 18,894
------- ------- ------ ---- ------- -------
$ 9,796 $10,922 $1,247 $ 93 11,043 11,015
======= ====== ====== ====
Corporate operations:
Other revenues ....................... 59 161
General and administrative expenses .. 1,566 1,424
Depreciation and amortization ........ 205 578
------- -------
(1,712) (1,841)
------- -------
Net operating revenue .................. $ 9,331 $ 9,174
======= =======
Other data:
Number of motels at period end ....... 123 123 21 2 144 125
Number of rooms at period end ........ 10,315 10,324 2,083 260 12,398 10,584
Occupancy percentage ................. 70.83% 71.24% 65.21% 49.46% 69.85% 70.70%
ADR (1) .............................. $41.52 $41.13 $38.99 $36.71 $41.10 $41.05
REVPAR (2) ........................... $31.52 $31.40 $26.50 $19.61 $30.64 $31.11
Net operating revenue margin (3) ..... 26.72% 30.51%
Net motel revenue margin (4) ......... 46.29% 49.10% 30.52% 31.16% 43.85% 48.82%
[FN]
(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 revenue margin represents net operating revenue divided
by total motel operating 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.
Total revenues consist principally of motel operating revenues. Motel
operating revenues are derived from room rentals and ancillary motel revenues
such as charges to guests for food and beverage service, long distance
telephone calls, fax machine use and from vending machines. Other revenues
include interest income, distributions on partnership interests in excess of
the Company's basis in such partnerships and other miscellaneous income.
Total revenues increased to $34,920,000 for the three months ended June 30,
1996 from $30,070,000 for the three months ended June 30, 1995, an increase of
$4,850,000 or 16.1%.
Motel revenues increased to $34,861,000 for the three months ended
June 30, 1996 from $29,909,000 for the three months ended June 30, 1995, an
increase of $4,952,000 or 16.6%. Approximately $4,796,000 of the increase in
motel revenues was attributable to the twenty-three motels acquired and four
motels divested since January 1, 1995 (the "acquired/divested motels") and
$156,000 of the increase related to motels owned during both periods. Motel
revenues for motels owned during both periods increased 0.5%. The increase in
motel revenues for motels owned during both periods was attributable to an
increase in the average daily room rate ("ADR") partially offset by a decrease
in the occupancy percentage. The ADR for the motels owned during both periods
increased to $41.52 for the three months ended June 30, 1996 from $41.13 for
the three months ended June 30, 1995, an increase of $0.39 or 0.9%. The
occupancy percentage for the three months ended June 30, 1996 for the motels
owned during both periods decreased to 70.8% from 71.2% for the three months
ended June 30, 1995. REVPAR for motels owned during both periods increased to
$31.52 for the three months ended June 30, 1996 from $31.40 for the three
months ended June 30, 1995, an increase of $.12 or 0.4%. The
acquired/divested motels had an occupancy percentage of 65.2%, an ADR of
$38.99 and REVPAR of $26.50 for the period which they were owned by the
Company in 1996.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, insurance, linens and other operating
supplies. Motel operating expenses increased to $17,951,000 for the three
months ended June 30, 1996 from $14,236,000 for the three months ended June
30, 1995, a net increase of $3,715,000 or 26.1%. Approximately $2,912,000 of
the increase is attributable to the cost of operating the acquired/divested
motels since January 1, 1995. The cost of operating motels owned during both
periods increased to $14,739,000 for the three months ended June 30, 1996 from
$13,936,000 for the three months ended June 30, 1995, an increase of $803,000
or 5.8%. Motel operating expenses as a percentage of motel revenues increased
to 51.5% for the three months ended June 30, 1996 from 47.6% for the three
months ended June 30, 1995. Motel operating expenses as a percentage of motel
revenues for the motels owned in both periods increased to 49.8% for the three
months ended June 30, 1996 from 47.3% for the three months ended June 30,
1995. The decrease in the operating margin for motels owned during both
periods is primarily attributable to certain operating expenses, especially
payroll and related costs and utilities, rising at a faster rate than motel
operating revenues. Motel operating expenses as a percent of motel revenues
for the acquired/divested motels was 61.1% for the three months ended June 30,
1996.
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
increased to $2,587,000 for the three months ended June 30, 1996 from
$2,050,000 for the three months ended June 30, 1995, an increase of $537,000
or 26.2%. Approximately $478,000 of the increase in marketing and royalty fees
was attributable to the acquired/divested motels. The marketing and royalty
fees for motels owned during both periods increased to $2,079,000 for the
three months ended June 30, 1996 from $2,020,000 for the three months ended
June 30, 1995, an increase of $59,000 or 2.9%. For the motels owned during
both periods, marketing and royalty fees as a percent of room revenues
increased to 7.5% for the three months ended June 30, 1996 from 7.4% for the
three months ended June 30, 1995.
Corporate general and administrative expenses include the costs of
corporate training, marketing, purchasing, administrative support and
accounting. The major components of these costs are salaries, wages and
related expenses, travel, rent and other administrative expenses. Corporate
general and administrative expenses increased $142,000 to $1,566,000 for the
three months ended June 30, 1996 from $1,424,000 for the three months ended
June 30, 1995, an increase of 10.0%. As a percentage of total motel operating
revenues, corporate general and administrative expenses decreased to 4.5% for
the three months ended June 30, 1996 from 4.8% for the three months ended June
30, 1995.
Depreciation and amortization increased to $3,587,000 for the three
months ended June 30, 1996 from $3,186,000 for the three months ended June 30,
1995, a net increase of $401,000 or 12.6%. Approximately $354,000 of the net
increase in depreciation and amortization is attributable to the
acquired/divested motels.
Net operating revenue increased to $9,331,000 for the three months
ended June 30, 1996 from $9,174,000 for the three months ended June 30, 1995,
an increase of $157,000 or 1.7%. The increase in net operating revenues
included a net increase of $700,000 in net motel revenues (motel revenues less
motel operating expenses and marketing and royalty fees). Of the $700,000 net
increase in net motel revenues, $1,406,000 resulted from the acquired/divested
motels. Net motel revenues for motels owned during both periods decreased
$706,000 or 5.2%. Net operating revenue as a percent of total revenues was
26.7% for the three months ended June 30, 1996 as compared to 30.5% for the
three months ended June 30, 1995.
Interest expense increased to $7,939,000 for the three months ended
June 30, 1996 from $7,181,000 for the three months ended June 30, 1995, an
increase of $758,000. The increase is principally due to an increase in
outstanding borrowings utilized to fund acquisitions of lodging facilities.
Net income decreased to $757,000 for the three months ended June 30,
1996 from $1,096,000 for the three months ended June 30, 1995.
The following discussion and analysis address results of operations
for the six months ended June 30, 1996 and 1995.
Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30, 1995
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
interim condensed consolidated financial statements presented elsewhere.
Supplemental Operating Results and Statistics
--------------------------------------------------------
(unaudited)
Six Months Ended June 30
--------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
----------------- ----------------- -----------------
1996 1995 1996 1995 1996 1995
------- ------- ------- ------- ------- -------
(dollars in thousands, except Other data)
Motel operations:
Motel operating revenues:
Room revenues ..................... $49,225 $48,843 $8,617 $750 $57,842 $49,593
Ancillary motel revenues .......... 3,910 3,866 358 80 4,268 3,946
------- ------- ------ ---- ------- -------
Total motel operating revenues .. 53,135 52,709 8,975 830 62,110 53,539
Motel costs and expenses:
Motel operating expenses .......... 28,133 27,412 5,444 607 33,577 28,019
Marketing and royalty fees ........ 3,746 3,622 842 50 4,588 3,672
Depreciation and amortization ..... 5,907 5,088 567 78 6,474 5,166
Net gain on sale of properties .... - - (102) - (102) -
------- ------- ------ ---- ------- -------
Total motel direct expenses ..... 37,786 36,122 6,751 735 44,537 36,857
------- ------- ------ ---- ------- -------
$15,349 $16,587 $2,224 $ 95 17,573 16,682
======= ======= ====== ====
Corporate operations:
Other revenues ...................... 142 277
General and administrative expenses . 3,095 2,897
Depreciation and amortization ....... 409 1,104
------- -------
(3,362) (3,724)
------- -------
Net operating revenue ................. $14,211 $12,958
======= =======
Other data:
Number of motels at period end ...... 123 123 21 2 144 125
Number of rooms at period end ....... 10,315 10,324 2,083 260 12,398 10,584
Occupancy percentage ................ 66.14% 67.68% 62.20% 50.18% 65.51% 67.25%
ADR (1) ............................. $39.62 $38.72 $38.80 $31.74 $39.49 $38.59
REVPAR (2) .......................... $28.28 $28.28 $25.14 $17.64 $27.78 $28.02
Net operating revenue margin (3) .... 22.83% 24.08%
Net motel revenue margin (4) ........ 43.18% 44.38% 31.21% 23.07% 41.40% 44.05%
[FN]
(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 revenue margin represents net operating revenue divided by
total motel operating 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.
Total revenues increased to $62,252,000 for the six months ended June
30, 1996 from $53,816,000 for the six months ended June 30, 1995, an increase
of $8,436,000 or 15.7%.
Motel revenues increased to $62,110,000 for the six months ended June
30, 1996 from $53,539,000 for the six months ended June 30, 1995, an increase
of $8,571,000 or 16.0%. Approximately $8,145,000 of the increase in motel
revenues was attributable to the acquired/divested motels and $426,000 of the
increase related to motels owned during both periods. Motel revenues for
motels owned during both periods increased 0.8%. The increase in motel
revenues for motels owned during both periods was attributable to an increase
in the average daily room rate ("ADR") partially offset by a decrease in the
occupancy percentage. The ADR for the motels owned during both periods
increased to $39.62 for the six months ended June 30, 1996 from $38.72 for the
six months ended June 30, 1995, an increase of $0.90 or 2.3%. The occupancy
percentage for the six months ended June 30, 1996 for the motels owned during
both periods decreased to 66.1% from 67.7% for the six months ended June 30,
1995. REVPAR for motels owned during both periods was unchanged for the six-
month periods ended June 30, 1996 and 1995. The acquired/divested motels had
an occupancy percentage of 62.2%, an ADR of $38.80 and REVPAR of $25.14 for
the period which they were owned by the Company in 1996.
Motel operating expenses increased to $33,577,000 for the six months
ended June 30, 1996 from $28,019,000 for the six months ended June 30, 1995,
an increase of $5,558,000 or 19.8%. Approximately $4,837,000 of the increase
is attributable to the cost of operating the acquired/divested motels since
January 1, 1995. The cost of operating motels owned during both periods
increased to $28,133,000 for the six months ended June 30, 1996 from
$27,412,000 for the six months ended June 30, 1995, an increase of $721,000 or
2.6%. Motel operating expenses as a percentage of motel revenues increased to
54.1% for the six months ended June 30, 1996 from 52.3% for the six months
ended June 30, 1995. Motel operating expenses as a percentage of motel
revenues for the motels owned in both periods increased to 52.9% for the six
months ended June 30, 1996 from 52.0% for the six months ended June 30, 1995.
The decrease in the operating margin for motels owned during both periods is
primarily attributable to certain operating expenses, especially payroll and
related costs and utilities, rising at a faster rate than motel operating
revenues. Motel operating expenses as a percent of motel revenues for the
acquired/divested motels was 60.7% for the six months ended June 30, 1996.
Marketing and royalty fees increased to $4,588,000 for the six months
ended June 30, 1996 from $3,672,000 for the six months ended June 30, 1995, an
increase of $916,000 or 24.9%. Approximately $792,000 of the increase in
marketing and royalty fees was attributable to the acquired/divested motels.
The marketing and royalty fees for motels owned during both periods increased
to $3,746,000 for the six months ended June 30, 1996 from $3,622,000 for the
six months ended June 30, 1995, an increase of $124,000 or 3.4%. For the
motels owned during both periods, marketing and royalty fees as a percent of
room revenues increased to 7.6% for the six months ended June 30, 1996 from
7.4% for the six months ended June 30, 1995.
Corporate general and administrative expenses increased $198,000 to
$3,095,000 for the six months ended June 30, 1996 from $2,897,000 for the six
months ended June 30, 1995, an increase of 6.8%. As a percentage of total
motel operating revenues, corporate general and administrative expenses
decreased to 5.0% for the six months ended June 30, 1996 from 5.4% for the six
months ended June 30, 1995.
Depreciation and amortization increased to $6,883,000 for the six
months ended June 30, 1996 from $6,270,000 for the six months ended June 30,
1995, a net increase of $613,000 or 9.8%. Approximately $489,000 of the net
increase in depreciation and amortization is attributable to the
acquired/divested motels.
Net operating revenue increased to $14,211,000 for the six months
ended June 30, 1996 from $12,958,000 for the six months ended June 30, 1995,
an increase of $1,253,000 or 9.7%. The increase in net operating revenues
included a net increase of $2,097,000 in net motel revenues (motel revenues
less motel operating expenses and marketing and royalty fees). Of the
$2,097,000 net increase in net motel revenues, $2,516,000 resulted from the
acquired/divested motels. Net motel revenues for motels owned during both
periods decreased $419,000 or 1.9%. Net operating revenue as a percent of
total revenues was 22.8% for the six months ended June 30, 1996 as compared
to 24.1% for the six months ended June 30, 1995.
Interest expense increased to $15,600,000 for the six months ended
June 30, 1996 from $13,821,000 for the six months ended June 30, 1995, an
increase of $1,779,000. The increase is principally due to an increase in
outstanding borrowings utilized to fund acquisitions of lodging facilities.
Net loss increased to $976,000 for the six months ended June 30, 1996
from $656,000 for the six months ended June 30, 1995.
Liquidity and Capital Resources
The Company's primary uses of its capital resources include debt
service, capital expenditures (primarily for motel refurbishment), working
capital and acquisitions of lodging facilities.
In May and June 1996, the Company sold two motel properties (including
the land underlying the properties) to unaffiliated parties for approximately
$1.3 million in cash and notes receivable of $750,000. The notes receivable
are collateralized by the motel properties, bear interest at 9% and provide
for monthly principal and interest receipts through 2011, although the notes
are callable prior to their due dates. Prior to the sale of one of the
properties, the Company purchased the land underlying the property for
$697,000. Under terms of MOA's $100 million secured line of credit facility
(the "line of credit") entered into with Nomura Asset Capital Corporation
("NACC"), the Company utilized approximately $1,187,000 of proceeds from the
sale of one of the motel properties to repay a portion of the line of credit.
In June of 1996, the Company leased one of its motel properties to an
unaffiliated party with the intent to sell the property to the lessee prior to
September 30, 1996. The lease provides for a monthly rental amount based on a
percentage of room revenue. In August of 1996, the Company sold a motel
property (including the land underlying the property) to an unaffiliated party
for approximately $100,000 in cash and a note receivable of $400,000. The
note receivable is collateralized by the motel property, bears interest at 9%
and provides for monthly principal and interest receipts through 2011,
although the note is callable prior to its due date. Prior to the sale of the
property, the Company purchased the land underlying the property for $425,000.
The Company's debt service requirements consist of the obligation to
make interest and principal payments on its outstanding indebtedness. As of
June 30, 1996, the Company has principal repayment obligations of $33,151,000,
$10,319,000 and $30,089,000 during the remainder of the fiscal year ending
December 31, 1996 and during the fiscal years ending December 31, 1997 and
1998, respectively. The Company has the ability to extend the maturity date
of October 1996 on the line of credit with NACC, under which the Company has
outstanding borrowings of $29.8 million at June 30, 1996. Management believes
that the Company will have sufficient resources through the ability to
refinance certain indebtedness and generate funds internally to meet all debt
repayment obligations which are scheduled to come due through December 31,
1998.
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 investment properties) of $4,564,000 and $3,564,000 for the six months
ended June 30, 1996 and 1995, respectively. In addition, as of June 30, 1996,
the Company has $1,946,000 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, 1996, cash and cash equivalents
decreased $4,530,000. This decrease consisted of $7,600,000 of funds provided
from operations and $37,697,000 of funds provided from financing activities
offset by $49,827,000 of funds utilized in investing activities. Net
financing activities include $41,659,000 of proceeds from additional
borrowings partially offset by $3,434,000 of principal repayments and $528,000
of deferred financing costs and other items. Net investing activities include
$51,437,000 of cash utilized for motel acquisitions and redevelopment of
existing motel properties ($46,873,000) and renovation of existing motel
properties ($4,564,000), offset by a change in cash restricted for
refurbishment of $216,000. Other investing activities included proceeds from
the sale of investment properties of $1,349,000 and collections on notes
receivable of $45,000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
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:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
On April 8, 1996, the Company filed an amendment to its
8-K filed on February 7, 1996 in which the Company
disclosed the acquisition of 19 lodging facilities from
Forte USA, Inc., a subsidiary of Forte Hotels, Inc.,
for approximately $35.5 million. The amendment
included financial statements of the acquired lodging
facilities and pro forma financial information related
to the acquisition.
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.
MOTELS OF AMERICA, INC.
August 9, 1996 By: /s/ Kurt M. Mueller
-------------------------------------
Kurt M. Mueller
President and Chief Operating Officer
August 9, 1996 By: /s/ C. Stephen Nowack
-------------------------------------
C. Stephen Nowack
Vice President and Tresaurer