<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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Quarterly Report Under Section 13 or 15 (d) of
the Securities Exchange Act of 1934
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For Quarter ended March 31, 1994 -- Commission File Number 1-6848
UNITED INNS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 58-0707789
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5100 Poplar Ave.- Suite 2300, Memphis, Tennessee 38137
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - 901-767-2880
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Security Exchange Act of 1934 during
the preceding 12 months (or for such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each issuer's classes of common
stock as of the close of the period covered by this report.
Class Outstanding at March 31, 1994
- -------------------------- -----------------------------
Common Stock, $1 par value 2,640,899 shares
<PAGE>
UNITED INNS, INC.
Form 10-Q Quarterly Report
March 31, 1994
Index
Part I Financial Information: Page No.
Consolidated Balance Sheet 3
March 31, 1994 and September 30, 1993
Consolidated Statement of Income -
Six Months Ended March 31, 1994 and 1993 4
Consolidated Statement of Cash Flows
Six Months Ended March 31, 1994 and 1993 5
Notes to Financial Statements 6
Management's Discussion and Analysis of Consolidated 7-8
Financial Condition and Results of Operations
Review by Independent Certified Public Accountants 9
Part II Other Information:
Other Information. 9
Signature 9
Exhibit 1 -- Report on Review by Independent Certified
Public Accountants 10
2
<PAGE>
<TABLE>
<CAPTION>
UNITED INNS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS 31-Mar-94 30-Sep-93
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
---------------
Cash and cash equivalents $4,347,108 $4,095,215
Current portion of long-term receivables 1,072,899 1,072,113
Accounts receivable - net of allowance
for bad debts of $77,530 for Mar 94
and $78,835 for Sep 93:
Trade 2,781,836 2,593,459
Other 515,393 1,085,197
Inventories (See note) 920,230 886,483
Prepaid expenses 6,988,765 6,084,713
------------- -------------
Total current assets 16,626,231 15,817,180
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INVESTMENTS:
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Long-term receivables less
current maturities 210,737 313,424
Land not in use - at cost 8,018,648 8,907,151
Other investments - at cost 10,000 10,000
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8,239,385 9,230,575
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PROPERTY AND EQUIPMENT - at cost:
---------------------------------
Land 13,696,986 13,696,986
Building and improvements 154,950,239 155,159,524
Furnishings and equipment 26,418,159 30,508,425
Property under capital leases 3,714,804 3,714,804
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198,780,188 203,079,739
Less accumulated depreciation 90,623,433 91,457,432
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108,156,755 111,622,307
Construction in progress 1,947,757 575,851
Property held for sale 3,794,155 4,107,880
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113,898,667 116,306,038
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OTHER ASSETS:
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Franchises 648,722 674,143
Deferred loan and other expenses 1,584,967 1,590,596
Restricted cash 3,066,504 3,114,320
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5,300,193 5,379,059
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$144,064,476 $146,732,852
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY 31-Mar-94 30-Sep-93
------------- -------------
<C> <C>
CURRENT LIABILITIES:
--------------------
Long-term debt due within one year $3,269,006 $3,243,325
Notes payable 697,431 261,160
Accounts payable - trade 2,495,840 2,418,739
Sales and occupancy taxes 1,253,938 1,211,561
Accrued expenses:
Payroll and payroll taxes 1,803,673 1,421,127
Rent and property taxes 1,707,500 2,706,849
Insurance 3,387,434 3,281,682
Interest and other 2,179,533 2,183,724
Income taxes payable 57,204 219,802
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Total current liabilities 16,851,559 16,947,969
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LONG-TERM DEBT:
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First Mortgages 101,221,649 102,926,861
Capital lease obligations 309,175 542,121
Chattel mortgages 1,086,132 625,934
Installment loans and other 309,500 313,692
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102,926,456 104,408,608
Less amounts due within one year 3,269,006 3,243,325
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99,657,450 101,165,283
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Minority Interest 555,769 517,096
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Deferred Other 1,311,422 1,410,978
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Deferred Income Taxes 5,428,696 5,721,882
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STOCKHOLDERS' EQUITY:
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Common Stock - $1 par 10 Mill shares
authorized shares issued 4,117,813 4,117,813 4,117,813
Paid in capital 14,613,138 14,613,138
Retained earnings 45,617,109 46,327,055
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64,348,060 65,058,006
Less treasury shares at cost
1,476,914 in 1994 ; 1,476,904 in 1993 44,088,480 44,088,362
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Total stockholders' equity 20,259,580 20,969,644
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$144,064,476 $146,732,852
============= =============
</TABLE>
3
<PAGE>
UNITED INNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED QUARTER ENDED
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31-Mar-94 31-Mar-93 31-Mar-94 31-Mar-93
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues
Rooms $33,506,338 $32,827,433 $18,180,326 $17,303,617
Restaurants 7,702,714 8,224,056 3,821,653 4,393,112
Car washes 528,102 914,049 285,102 336,308
Telephone & sundry 2,056,921 2,316,720 1,137,029 848,404
--------------- --------------- --------------- ---------------
43,794,075 44,282,258 23,424,110 22,881,441
--------------- --------------- --------------- ---------------
Operating costs and expenses:
Direct:
Rooms 22,235,414 23,041,869 11,442,210 11,525,405
Restaurants 7,564,379 8,201,220 3,785,598 4,065,680
Car washes 494,154 1,078,383 251,379 373,934
Telephone & sundry 902,609 948,127 448,665 461,516
Marketing, administrative and general 4,919,343 4,947,226 2,536,814 2,386,428
Depreciation 4,520,440 4,501,645 2,301,321 2,217,297
--------------- --------------- --------------- ---------------
40,636,339 42,718,470 20,765,987 21,030,260
--------------- --------------- --------------- ---------------
Operating income 3,157,736 1,563,788 2,658,123 1,851,181
Interest expense (4,899,659) (4,897,953) (2,451,369) (2,414,096)
Minority interest (38,673) (23,519) (23,618) (17,726)
Gain on sale of assets 890,548 1,222,338 890,548 1,222,338
--------------- --------------- --------------- ---------------
Income (loss) before income taxes (890,048) (2,135,346) 1,073,684 641,697
Income taxes (credit) (180,102) (789,470) 488,296 197,385
--------------- --------------- --------------- ---------------
Net income (loss) ($709,946) ($1,345,876) $585,388 $444,312
=============== =============== =============== ===============
Per share of common stock
Net income (loss) ($0.27) ($0.51) $0.22 $0.17
=============== =============== =============== ===============
Weighted average shares
of common stock 2,640,908 2,640,909 2,640,906 2,640,909
=============== =============== =============== ===============
Dividends per share $0.00 $0.00 $0.00 $0.00
=============== =============== =============== ===============
</TABLE>
4
<PAGE>
UNITED INNS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31,
1994 1993
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($709,946) ($1,345,876)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,745,001 4,706,408
Loss (gain) from property dispositions (959,211) (1,222,338)
Deferred income taxes (293,186) (831,812)
Minority interest 38,673 23,519
Changes to operating assets and liabilities:
Accounts receivable 381,427 (526,976)
Inventories (33,747) 70,930
Prepaid expenses (467,781) (248,046)
Accounts payable 74,096 885,379
Accrued expenses (522,417) (1,207,356)
Income taxes payable (162,598) (92,891)
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Net cash provided by (used for) operating activities 2,090,311 210,941
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INVESTING ACTIVITIES
Purchase of property, plant and equipment (1,178,392) (2,827,606)
Proceeds from sale of fixed assets 2,047,769 2,106,468
Payments received on notes receivable 51,900 3,305
Other investing activities (686,339) (626,697)
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Net cash provided by (used for) investing activities 234,938 (1,344,530)
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FINANCING ACTIVITIES
Payments on long-term debt (2,073,238) (1,505,530)
Other financing activities (118) 946,950
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Net cash provided (used for) financing activities (2,073,356) (558,580)
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Increase (Decrease) in cash and cash equivalents 251,893 (1,692,169)
Cash and cash equivalents at beginning of year 4,095,215 3,916,377
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Cash and cash equivalents at end of period $4,347,108 $2,224,208
============== ==============
Supplemental disclosures of cash flow information:
Cash paid (received) during the nine months for:
Interest $4,685,830 $5,240,084
State and federal income taxes 254,424 100,903
Supplemental schedule of non-cash investing and
financing activities:
Debt to acquire property, plant and equipment 551,677
Restricted cash used to purchase property,
plant and equipment 580,050 500,384
Note received in exchange for property 1,400,000
</TABLE>
5
<PAGE>
UNITED INNS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1994
Note A - Basis of Presentation
The accompanying unaudited 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
Rule 10-01 of Regulation S-X. They do not include all information and
notes required by generally accepted accounting principles for complete
financial statements. However, except as disclosed herein, there has been
no material change in the information disclosed in the notes to
consolidated financial statements included in the Annual Report of Form
10-K of United Inns, Inc. for the year ended September 30, 1993. The
statement of income for the three months ended March 31, 1993 has been
restated in certain instances for comparability purposes. In the
opinion of Management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended March 31, 1994 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1994.
Note B - Inventories
Inventories are stated at the lower of cost or market on a first in, first
out basis. Included in inventory classified as Supplies are hotel linens
and restaurant supplies, consisting primarily of china, silverware, and
cooking utensils, car wash operating and cleaning supplies. Following is a
summary of items included under the caption, "Inventories":
<TABLE>
<CAPTION>
March 31, 1994 September 30, 1993
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<S> <C> <C>
Merchandise:
Food and Beverage $ 309,703 $ 297,064
Car Wash 12,138 15,681
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321,841 312,745
Supplies 598,389 573,738
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Total Inventories $ 920,230 $ 886,483
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</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Registrant reported cash flow from operating activities for the first six
months of fiscal 1994 in the amount of $2.1 million, as compared with $.2
million for the same period in 1993. Total cash flow for fiscal year to date
1994 was $.3 million, as compared with a deficit of $1.7 million for the 1993
six month period.
During second quarter of fiscal 1994 sales proceeds of $2.0 million were
received from the sale of surplus vacant land in Atlanta and a former car wash
site in Dallas. During the first six months of fiscal 1993, the Registrant
realized net sales proceeds of $1.9 million on the sale of a hotel and five
operating car wash units.
During the first six months of fiscal 1994 the Registrant expended $2.3 million
on capital expenditures, consisting principally of renovation projects on six
hotels and television replacements at seven hotels. Funding of these
expenditures was accomplished with $.6 million in installment sales contracts;
$.6 million from restricted cash deposits; with the remaining $1.1 million
provided from operating cash flow.
With improving cash flows and sale of targeted properties, the Registrant
believes short term cash flow needs for working capital and renovation programs
will be provided.
RESULTS OF OPERATIONS
REVENUES - total revenues for the six months ended March 31, 1994 decreased by
$.5 million over the corresponding period ended March 31, 1993. Decreased
revenues resulted primarily from decreased car wash revenues of $.4 million as
compared with the same period of fiscal 1993, influenced by the fact that only
one car wash unit was operated during the 1994 six months period. In fiscal
1993 six other car wash units were operated for just over two months of that
year. Five were sold in early December, 1992 and one other unit was closed.
Although gross hotel revenues declined by $56,000 for the six months of fiscal
1994, gross revenues attributable to two hotels which were disposed of in fiscal
1993 amounted to $1.2 million. The Registrant's most important revenue element,
hotel room revenue improved by $.7 million for the six months, however same
hotel room revenue increased by $1.6 million.
7
<PAGE>
Following is a table comparing room revenues, relative occupancy levels and
average daily room rates (ADR) of the twenty-eight hotels remaining in the
system for the six months and quarter ended March 31:
<TABLE>
<CAPTION>
SIX MONTHS QUARTER
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Room Revenue $33,506,000 $31,864,000 $18,180,000 $16,969,000
Occupancy 51.04% 48.44% 53.74% 51.45%
ADR $54.56 $51.66 $56.62 $52.31
</TABLE>
Food and beverage and sundry revenues decreased by $.7 million for the six
months and by $.3 million for the quarter from the same periods last year.
Decreased other revenues attributable to the two hotels disposed of were $.2
million and $.1 million for the respective periods.
OPERATING COSTS AND EXPENSES - total operating costs and expenses decreased by
$2.1 million for the six month period and by $.3 million for the quarter ended
March 31, 1994. The reduction attributable to the two hotels which were
disposed of was $1.4 million for the six months and $.6 million for the
quarter. Additionally, operating costs and expenses of the car washes
decreased by $.7 million for the six months and by $.2 million for the
quarter.
GAIN ON DISPOSITION OF ASSETS - a gain of $.9 million was recognized upon the
sale during the second quarter of fiscal 1994 of an unimproved tract of land in
Atlanta and a former car wash unit in Dallas. During second quarter of fiscal
1993 the Registrant reported a gain of $1.2 million on the sale of a hotel in
Houston.
INCOME TAXES - effective October 1, 1993 the Registrant changed its method of
accounting for income taxes from the deferred method to the liability method
required by Statement of Financial Accounting Standards ("FAS") No. 109,
"Accounting for Income Taxes". As permitted under the new rule, prior years'
financial statements have not been restated. The cumulative effect of adopting
this statement as of October 1, 1993 was immaterial to net earnings. The
effective tax rates for the 1994 six months period was a tax credit of 20.4%,
compared with a credit of 37% for the same period last year. For the quarters,
the effective tax rate was 50.3% for 1994 as compared with 30.8% for the 1993
second quarter. Since the emphasis of the FAS 109 tax calculation is on the
computation of deferred income taxes resulting from timing differences in book
and tax treatment of expenses and in valuation of net operating loss
carryforwards, the provision for income tax does not correlate directly to
reported income before taxes for fiscal 1994.
8
<PAGE>
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Frazee, Tate and Associates independent certified public accountants, have
performed a review of the consolidated balance sheet as of March 31 1994 and
September 30, 1993, and the consolidated statement of income, and the
consolidated statement of cash flows for the six months ended March 31, 1994 and
1993, included in this report. Such reviews were made in accordance with
standards established by the American Institute of Certified Public Accountants.
All adjustments or additional disclosures proposed by Frazee, Tate and
Associates have been reflected in the data presented.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders
during the quarter ended March 31, 1994.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit 1 - Report on Review by Independent Certified
Public Accountants.
(b) Reports on Form 8-K -- There were no reports on Form
8-K filed for the quarter ended March 31, 1994, as no events which
require the filing of Form 8-K occurred during the quarter.
SIGNATURE
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.
UNITED INNS, INC.
(Registrant)
/s/ J. D. Miller
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J. D. Miller
Vice President - Finance and
Date: May 13, 1994 Chief Accounting Officer
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9
<PAGE>
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
United Inns, Inc.
Memphis, Tennessee
We have made a review of the consolidated balance sheet of United Inns, Inc.
and Subsidiaries as of March 31, 1994, and September 30, 1993, and the
consolidated statement of income, and the consolidated statement of cash flows
for the six month period ended March 31, 1994 and 1993, in accordance with
standards established by the American Institute of Certified Public
Accountants.
A review of interim financial information consists principally of obtaining an
understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and
making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them
to be in conformity with generally accepted accounting principles.
/s/ Frazee, Tate & Associates
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FRAZEE, TATE & ASSOCIATES
Certified Public Accountants
Memphis, Tennessee
May 13, 1994
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