U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
or
[_] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-22745
Janus Hotels and Resorts, Inc.
(Name of Small Business Issuer in its Charter)
DELAWARE 13-2572712
(State or Other Jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
2300 Corporate Blvd., N.W.,
Suite 232
Boca Raton, Florida 33431-8596
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 994-4800
(Former name)
Check whether issues (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes |X| No | |
Number of shares of common stock outstanding as of September 30, 1999: 8,671,092
Transitional Small Business Disclosure Format: Yes | | No |X|
Page 1 of 12
<PAGE>
<TABLE>
<CAPTION>
JANUS HOTELS AND RESORTS, INC.
FORM 10-QSB
FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
<S> <C> <C>
Part I. Financial Information Page No.
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets As Of September 30, 1999
and December 31, 1998 3
Unaudited Consolidated Statements Of Operations For The Three Months
Ended September 30, 1999 and 1998 4
Unaudited Consolidated Statements Of Operations For The Nine Months
Ended September 30, 1999 and 1998 5
Unaudited Consolidated Statements Of Cash Flows For The Nine Months
Ended September 30, 1999 and 1998 6
Notes To Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis Of Financial Condition and Results of Operations 9
Part II. Other Information
Items 1-5 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page 12
</TABLE>
2
<PAGE>
<TABLE>
JANUS HOTELS AND RESORTS, INC.
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
September 30, December 31,
1999 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,494,737 $ 12,383,741
Restricted cash 2,759,377 802,746
Accounts receivable 2,666,979 1,422,327
Current portion of notes receivable 534,833 322,043
Other current assets 209,986 239,206
----------- -----------
Total current assets 16,665,912 15,170,063
----------- -----------
Property held for sale 14,167,560 -
Property and equipment, net 83,991,204 74,550,300
Notes receivable - 453,194
Mortgage notes receivable 3,424,999 5,425,046
Goodwill, net 6,409,114 6,536,996
Deferred tax asset 1,168,388 680,126
Other assets 5,455,138 5,868,067
----------- -----------
$131,282,315 $108,683,792
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable for redemption of preferred stock $ 35,621 $ 41,370
Current portion of long-term debt 2,585,275 2,683,504
Accounts payable 1,866,763 1,495,253
Accrued expenses 4,450,313 1,910,248
----------- -----------
Total current liabilities 8,937,972 6,130,375
----------- -----------
Long-term debt, net of current portion 71,149,056 60,582,883
Minority interest 2,525,411 1,773,960
Stockholders' equity:
Preferred stock, series B; par value $0.01 per share; 20,000 shares authorized;
16,788.08 and 10,451.88 shares issued and outstanding 168 105
Common stock, par value $0.01 per share; 15,000,000 shares authorized;
11,883,220 shares issued 118,833 118,833
Additional paid-in capital 52,074,258 45,738,120
Accumulated deficit (2,107,084) (4,244,185)
Treasury stock, 3,212,128 and 3,192,128 common shares, at cost (1,416,299) (1,416,299)
----------- -----------
Total stockholders' equity 48,669,876 40,196,574
----------- -----------
$131,282,315 $108,683,792
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
3
<PAGE>
<TABLE>
JANUS HOTELS AND RESORTS, INC.
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
<S> <C> <C>
Revenues:
Room and related services $12,689,305 $ 9,645,826
Food and beverage 2,793,761 2,783,325
Management fees 517,214 317,976
Other 247,481 236,530
---------- ----------
Total revenues 16,247,761 12,983,657
---------- ----------
Operating expenses:
Direct:
Room and related services 2,867,023 2,173,103
Food and beverage 2,194,057 2,368,169
Selling and general 534,879 632,742
---------- ----------
Total direct expenses 5,595,959 5,174,014
---------- ----------
Occupancy expenses 1,793,557 1,431,353
Selling, general and administrative expenses 3,291,592 2,135,026
Depreciation 292,152 840,942
Amortization 80,095 58,521
---------- ----------
Total operating expenses 11,053,355 9,639,856
---------- ----------
Operating income 5,194,406 3,343,801
Other income (expense):
Interest expense (1,628,050) (1,289,484)
Interest income 161,856 248,304
Other (168,111) -
---------- ----------
Income from continuing operations before income taxes and minority interest 3,560,101 2,302,621
Provision for income taxes 651,861 230,895
---------- -----------
Income from continuing operations before minority interest 2,908,240 2,071,726
Minority interest 59,940 111,407
---------- -----------
Income from continuing operations 2,848,300 1,960,319
Loss on disposal of discontinued operations, net of taxes 128,547 -
---------- -----------
Net income 2,719,753 1,960,319
Less preferred dividend requirement 313,914 197,584
---------- -----------
Net income applicable to common stock $ 2,405,839 $ 1,762,735
========== ===========
Basic income per common share:
Income from continuing operations $0.29 $0.20
Loss on disposal of discontinued operations 0.01 -
---- ----
Net income $0.28 $0.20
==== ====
Diluted income per common share:
Income from continuing operations $0.29 $0.20
Loss on disposal of discontinued operations 0.01 -
---- ----
Net income $0.28 $0.20
==== ====
Weighted average common shares:
Basic 8,671,092 8,694,088
========= =========
Diluted 8,671,092 8,915,335
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
<TABLE>
JANUS HOTELS AND RESORTS, INC.
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
<S> <C> <C>
Revenues:
Room and related services $30,423,220 $14,610,273
Food and beverage 7,878,243 3,576,178
Management fees 1,540,172 1,134,009
Other 664,624 371,354
---------- ----------
Total revenues 40,506,259 19,691,814
---------- ----------
Operating expenses:
Direct:
Room and related services 7,224,122 3,409,281
Food and beverage 6,154,563 3,034,371
Selling and general 1,539,837 928,219
---------- ----------
Total direct expenses 14,918,522 7,371,871
---------- ----------
Occupancy expenses 5,137,107 2,314,338
Selling, general and administrative expenses 8,800,329 4,229,034
Depreciation 2,891,973 1,539,413
Amortization 237,602 154,867
---------- ----------
Total operating expenses 31,985,533 15,609,523
---------- ----------
Operating income 8,520,726 4,082,291
Other income (expense):
Interest expense (4,975,254) (2,214,471)
Interest income 526,024 886,347
Other (163,332) -
---------- ----------
Income from continuing operations before income taxes and minority interest 3,908,164 2,754,167
Provision (credit) for income taxes 651,861 (30,320)
---------- ----------
Income from continuing operations before minority interest 3,256,303 2,784,487
Minority interest 94,022 112,502
---------- ----------
Income from continuing operations 3,162,281 2,671,985
Loss on disposal of discontinued operations, net of taxes 128,547 -
---------- ----------
Net income 3,033,734 2,671,985
Less preferred dividend requirement 896,630 591,142
---------- ----------
Net income applicable to common stock $ 2,137,104 $ 2,080,843
========== ==========
Basic income per common share:
Income from continuing operations $0.26 $0.24
Loss on disposal of discontinued operations 0.01 -
---- ----
Net income $0.25 $0.24
==== ====
Diluted income per common share:
Income from continuing operations $0.26 $0.23
Loss on disposal of discontinued operations 0.01 -
---- ----
Net income $0.25 $0.23
==== ====
Weighted average common shares:
Basic 8,674,975 8,693,855
========= =========
Diluted 8,674,975 8,915,102
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
5
<PAGE>
<TABLE>
JANUS HOTELS AND RESORTS, INC.
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
<S> <C> <C>
Operating activities:
Net income $ 3,033,734 $ 2,671,985
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,891,973 1,539,413
Amortization of intangible assets 237,602 154,867
Deferred taxes 259,171 -
Minority interest 94,022 112,502
Loss on sale of property 168,110 -
Discontinued operations 143,628 (73,948)
Changes in operating assets and liabilities:
Accounts receivable (1,244,652) (1,201,574)
Other current assets 29,220 212,092
Other assets 786,830 (3,871,097)
Accounts payable and accrued expenses 817,932 2,670,966
---------- ----------
Net cash provided by operating activities 7,217,570 2,215,206
---------- ----------
Investing activities:
Acquisition of hospitality business, net of noncash consideration and cash acquired 462,008 -
Increase in notes receivable (250,000) (4,276)
Purchases of property and equipment (3,992,024) (904,864)
Proceeds from sale of property 2,250,000 -
Gain on sale of subsidiary's net assets - 14,161
Collections of notes receivable 348,703 130,188
---------- ----------
Net cash used in investing activities (1,181,313) (764,791)
---------- ----------
Financing activities:
Dividends paid (896,630) (788,707)
Increase in restricted cash (1,956,631) -
Conversion of warrants to common stock - 8,823
Proceeds from long-term borrowings - 2,804,878
Repayments of long-term borrowings (5,072,000) (434,101)
---------- ----------
Net cash (used in) provided by financing activities (7,925,261) 1,590,893
---------- ----------
Increase (decrease) in cash and cash equivalents (1,889,004) 3,041,308
Cash and cash equivalents, beginning of period 12,383,741 11,523,848
---------- ----------
Cash and cash equivalents, end of period $10,494,737 $14,565,156
========== ==========
Supplemental disclosure of cash flow data:
Interest paid $ 3,347,204 $ 2,214,471
========== ==========
Noncash transactions:
Acquisition of hospitality business
Assets acquired $27,192,451
Liabilities assumed 20,856,251
----------
Value of stock issued $ 6,336,200
==========
</TABLE>
See notes to unaudited consolidated financial statements.
6
<PAGE>
JANUS HOTELS AND RESORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position
of Janus Hotels and Resorts, Inc. (formerly Janus American Group, Inc.)
and subsidiaries (the "Company" or "Janus") as of September 30, 1999,
its results of operations for the three months and nine months ended
September 30, 1999 and 1998 and its cash flows for the nine months
ended September 30, 1999. Certain terms used herein are defined in the
audited consolidated financial statements of the Company as of December
31, 1998 and for the years then ended (the "Audited Janus Financial
Statements") included in the Company's form 10-KSB previously filed
with the Securities and Exchange Commission. Accordingly, these
unaudited consolidated financial statements should be read in
conjunction with the Audited Janus Financial Statements and the other
financial statements included in the Form 10-KSB.
The results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results of operations for the
full year ending December 31, 1999.
Note 2 -- Organization:
As of September 30, 1999, the Company owned and operated seventeen
hotels (of which fifteen are wholly-owned, one 85% owned and one 75%
owned) and a hotel management company which manages hotels for
unrelated parties.
Note 3 - Change in Estimated Useful Lives:
Effective July 1, 1999, Janus completed significant renovations of its
portfolio of properties in accordance with its operating plan. These
renovations upgraded the facilities and improved the average daily room
rate. The Company provided the liquidity to perform these renovations
and management continues to anticipate that further acquisitions will
be subjected to the same operating plan. The result of these
improvements is that the useful life of the previously acquired
properties was increased to reflect the upgrades. Building and
mechanical improvement lives were changed to reflect this renovation
and are now depreciated from 15 to 40 years. The new equipment and
existing equipment has a life range of 5 to 10 years. Management
believes the revised estimated useful lives provide a better matching
of costs and revenues. The effect of this change on net income for the
nine months ended September 30, 1999 was to increase net income by
approximately $510,000 or $0.06 per diluted share.
Note 4 - Allocation of Purchase Price:
In August 1998, the Company acquired four hotel properties. During the
third quarter of 1999, the Company finalized the allocation of the
purchase price based on appraised values between land, buildings,
equipment, and furniture and fixtures. As a result, depreciation
expense was reduced by approximately $347,000 in the third quarter of
1999.
Note 5 -- Acquisition:
Effective January 1, 1999 the Company acquired all of the outstanding
shares of Beck Hospitality, Inc. II ("Beck II"), which owned seven
hotels and two hotel management contracts with respect to the hotels
known as Knights Inn West Palm Beach in West Palm Beach, Florida and
Days Inn Inner Harbor in Baltimore, Maryland. The purchase price of
$6,336,200 approximated the fair value of the net assets acquired. The
acquisition was accounted for under the purchase method. The results of
operations of the acquired business are included in the consolidated
financial statements from the effective date of acquisition. The
consideration exchanged by the Company pursuant to the merger agreement
with Beck II was the issuance of 6,336.20 shares of Series B preferred
stock with a liquidation preference of $1,000 per share for a total
value of $6,336,200.
7
<PAGE>
The following unaudited pro forma information presents the results of
operations of the Company for the three months and nine months ended
September 30, 1998 as if the acquisition had taken place on January 1,
1998:
<TABLE>
<CAPTION>
(in thousands, except per Three Months Ended Nine Months Ended
share amounts) September 30, 1998 September 30, 1998
<S> <C> <C>
Revenues $16,051,901 $27,437,680
Net income 2,410,484 3,296,648
Earnings per share:
Basic $0.24 $0.27
Diluted $0.23 $0.26
</TABLE>
Note 6 - Property Held for Sale:
At September 30, 1999, the Company held two hotel properties for sale
which were determined by the board of directors and management to be
performing at optimum standards but located in markets where the growth
potential in real estate value is limited and not conducive to the long
range plans of the Company. In accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long
Lived Assets and for Long-Lived Assets to be Disposed Of, a property is
considered to be held for sale when the Company has made the decision
to dispose of the property. At that time the Company discontinues
depreciating the asset and estimates the fair value of such asset. If
the fair value of a hotel property held for sale is less than net book
value, a reserve for losses is established. Because the hotels are
presently performing at optimum standards the fair market values of the
properties are in excess of their carrying value. No reserve is
considered necessary at September 30, 1999. Company management and the
board of directors designated the two hotel properties held for sale
prior to July 1, 1999. As a result, depreciation in the amount of
approximately $201,000 was not recorded. The Company expects to dispose
of these properties within the next twelve to eighteen months.
In connection with the designation of the properties as held for sale
and in accordance with the provisions of Section 384, Limitation on use
of preacquisition losses to offset built-in gains, of the Internal
Revenue Code, a deferred tax charge of $259,171 was recorded to
recognize the potential liability associated with the eventual sale of
the properties mentioned. This charge is recorded in accordance with
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, and a change in the corporate strategy to hold these
properties for the five years required by Section 384 of the Internal
Revenue Code.
Note 7 - Disposal of Hotel Property:
On September 29, 1999, the Company disposed of a hotel property located
in Westerville. Ohio. The hotel was sold for $2,500,000 resulting in a
loss of approximately $168,000. The consideration was $2,250,000 in
cash and a $250,000 note receivable that is collectible through monthly
payments over three years. The note has an interest rate of 10%.
Note 8 - Discontinued Operations
In April 1998, the Company entered into an agreement for the sale of
its oil and gas services operations. An amendment to this agreement was
completed in September 1999. As part of the amended agreement, the
buyers have the right to make a payment of $356,372 on or before
December 31, 1999 in settlement of a $500,000 note. If the payment is
not made, the note shall be paid out over a period of sixty months at
an 8% rate of interest. Management believes the buyers will make the
payment before December 31, 1999. As a result, a loss from disposal of
discontinued operations of $143,628 has been accrued.
Note 9 -- Litigation:
The Company is a party to various legal proceedings. In the opinion of
management, these actions are routine in nature and will not have a
material adverse effect on the Company's consolidated financial
statements in subsequent years.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The operations of the Company are comprised primarily of the operations of owned
hotels and the Company's management of hotels owned by third parties.
The Company had net income of $2,719,753 for the three months ended September
30, 1999 compared to $1,960,319 for the three months ended September 30, 1998.
The Company had net income of $3,033,734 for the nine months ended September 30,
1999 compared to net income of $2,671,985 for the nine months ended September
30, 1998.
Three Months Ended September 30, 1999 Compared to the Three Months Ended
September 30, 1998
Room and related services revenue increased 31.6% to $12,689,305 in 1999 from
$9,645,826 in 1998. The increase was attributable primarily to acquisitions. The
average daily room rate increased to $67.59 for 1999 from $58.68 in 1998.
Occupancy decreased in 1999 to 73.1% from 79.5% in 1998 partly due to
management's decision to increase room rates in segments of various markets.
Excluding the acquisitions made in 1998 and 1999, room and related services
revenue increased 1.9%.
Food and beverage revenues are principally a function of the number of guests
who stay at each owned hotel, local walk-in business and catering sales. These
revenues increased 0.4% to $2,793,761 in 1999 from $2,783,325 in 1998. This
increase is related primarily to acquisitions. Excluding the acquisitions made
in 1998 and 1999, food and beverage revenues decreased 1.1%.
Management fee income increased 62.7% to $517,214 in 1999 from $317,976 in 1998.
This increase is due to the addition of new third party management contracts.
Total direct operating expenses increased 8.2% to $5,595,959 in 1999 from
$5,174,014 in 1998 but decreased as a percentage of room and related services
and food and beverage revenues to 36.1% from 41.6%. Excluding the acquisitions
made in 1998 and 1999, total direct operating expenses decreased 10.0%.
Occupancy expenses increased 25.3% to $1,793,557 from $1,431,353 in 1998.
Excluding the acquisitions made in 1998 and 1999, occupancy expenses decreased
5.5%.
Selling, general and administrative expenses increased 54.2% to $3,291,592 in
1999 from $2,135,026 in 1998 and increased as a percentage of total revenues to
20.3% from 16.4%. Excluding the acquisitions made in 1998 and 1999, selling,
general and administrative expenses increased 30.0%. This increase is
attributable to additional regional management salaries and commissions on
management contracts.
Depreciation decreased by $548,790 in 1999 from $840,942 in 1998. The decrease
was primarily attributable to the change in estimated useful lives, the
adjustment of the purchase allocation for four hotel properties based on an
acquisition appraisal, and the cessation of depreciation on two hotel properties
held for sale. These changes reduced 1999 depreciation approximately $1,058,000.
Interest income decreased to $161,856 in 1999 from $248,304 in 1998. The
decrease was attributable to the elimination of a note receivable as a result of
the Company's acquisition of the underlying hotel property effective January 1,
1999.
Interest expense increased to $1,628,050 in 1999 from $1,289,484 in 1998. The
increase was attributable to the debt assumed in connection with the
acquisitions effective January 1, 1999.
Minority interest decreased to $59,940 in 1999 from $111,407 in 1998 reflecting
the results of operations from the Kings Dominion partnership and the Days Inn
Pompano hotel in 1999.
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998
Room and related services revenue increased 108.2% to $30,423,220 in 1999 from
$14,610,273 in 1998. The increase was attributable primarily to acquisitions.
The average daily room rate increased to $61.88 for 1999 from $51.57 in 1998.
Occupancy decreased in 1999 to 64.3% from 65.8% in 1998 partly due to
management's decision to increase room rates in segments of various markets.
Excluding the acquisitions made in 1998 and 1999, room and related services
revenue increased 1.2%.
Food and beverage revenues increased 120.3% to $7,878,243 in 1999 from
$3,576,178 in 1998. This increase is related to acquisitions. Excluding the
acquisitions made in 1998 and 1999, food and beverage revenues decreased 2.3%.
Management fee income increased 35.8% to $1,540,172 in 1999 from $1,134,009 in
1998. This increase is due to the addition of new third party management
contracts.
9
<PAGE>
Total direct operating expenses increased 102.4% to $14,918,522 in 1999 from
$7,371,871 in 1998 and decreased as a percentage of room and related services
and food and beverage revenues to 39.0% from 40.5%. Excluding the acquisitions
made in 1998 and 1999, total direct operating expenses decreased 6.7%.
Occupancy expenses increased 122.0% to $5,137,107 in 1999 from $2,314,338.
Excluding the acquisitions made in 1998 and 1999,
occupancy expenses decreased 2.9%.
Selling, general and administrative expenses increased 108.1% to $8,800,329 in
1999 from $4,229,034 in 1998 and increased as a percentage of total revenues to
21.7% from 21.5%. Excluding the acquisitions made in 1998 and 1999, selling,
general and administrative expenses increased 29.1%. This increase is
attributable to additional regional management salaries, commissions on
management contracts and increased legal expenses.
Depreciation increased by $1,352,560 in 1999 from $1,539,413 in 1998. The
increase was primarily attributable to depreciation for the acquisitions made in
1998 and 1999 but was offset by the change in estimated useful lives, the
adjustment of the purchase allocation for four hotel properties based on an
acquisition appraisal, and the cessation of depreciation on two hotel properties
held for sale. These changes reduced depreciation approximately $1,058,000.
Interest income decreased to $526,024 in 1999 from $886,347 in 1998. The
decrease was attributable to interest related to a federal income tax refund in
1998 and the elimination of a note receivable as a result of the Company's
acquisition of the underlying hotel property effective January 1, 1999.
Interest expense increased to $4,975,254 in 1999 from $2,214,471 in 1998. The
increase was attributable to the debt incurred or assumed for the acquisitions.
Minority interest decreased to $94,022 in 1999 from $112,502 in 1998 reflecting
the results of operations from the Days Inn Pompano hotel and the Kings Dominion
partnership in 1999.
Liquidity and Capital Resources
Total assets increased to $131,282,315 at September 30, 1999 from $108,683,792
at December 31, 1998. The increase in total assets was the result of the
acquisition of Beck II described in Note 5 of the Unaudited Consolidated
Financial Statements.
Net cash provided by operating activities increased to $7,217,570 in the nine
months ended September 30, 1999 from $2,215,206 in the nine months ended
September 30, 1998, an increase of $5,002,364. The increase is primarily the
result of the acquisitions made in 1998 and 1999.
Net cash used in investing activities increased to $1,181,313 in the nine months
ended September 30, 1999 from $764,791 in the nine months ended September 30,
1998. The increase is primarily the result of an increase in capital
expenditures of $3,087,160. The Company plans to spend an additional $1,030,000
on capital improvements during the remainder of 1999.
Net cash used in financing activities was $7,925,261 in the nine months ended
September 30, 1999 compared to $1,590,893 provided by financing activities in
the nine months ended September 30, 1998. The change is primarily the result of
an increase in the repayments of long-term borrowings of $4,637,899 and an
increase in restricted cash of $1,956,631.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased to $11,650,301 during the nine months ended September 30, 1999. EBITDA
is defined as operating income plus depreciation and amortization. The Company
considers this definition of EBITDA to be an indicative measure of the Company's
operating performance because it can be used to measure the Company's abilities
to service debt, fund capital expenditures and expand its business; such
information should not be considered as an alternative to net income, operating
profit, cash flows from operations or any other operating or liquidity measure
prescribed by generally accepted accounting principles.
The Company maintains a number of commercial banking relationships and maintains
a line of credit totaling $2,200,000, which had no amount outstanding at
September 30, 1999.
The Company's principal sources of liquidity are cash on hand (including escrow
deposits and replacement reserves), cash from operations, earnings on invested
cash and, when required, principally in connection with acquisitions, borrowings
(consisting primarily of loans secured by mortgages on real property owned or to
be acquired by the Company). The Company's continuing operations are funded
through cash generated from its hotel operations. Acquisitions of hotels are
expected to be financed through a combination of cash on hand, internally
generated cash, issuance of equity securities and borrowings, some of which is
likely to be secured by assets of the Company.
10
<PAGE>
Seasonality
Demand at many of the Company's hotels is affected by seasonal patterns. Demand
for hotel rooms in the industry generally tends to be lower during the first and
fourth quarters and higher in the second and third quarters. Accordingly, the
Company's revenues reflect similar seasonality.
Year 2000 Issues
The Company conducted a review of its computer systems to identify the systems
that could be affected by the "Year 2000" issue and executed a plan to resolve
the issue. The Year 2000 problem is the result of computer programs being
written using the two digits rather than four to define the applicable year.
Some computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
major system failure or miscalculations. The Company presently believes that, it
has completed the necessary modifications to existing software or conversions to
new software, so that the Year 2000 problem will not pose operational problems
for the Company's computer systems. In addition, the Company has also worked
with each of its hotel property general managers to complete a plan to ensure
that all of the computerized operations at each of the hotels continue to run
properly on and after January 1, 2000. All hotels had a Year 2000 test prior to
September 30, 1999 to ensure that the Year 2000 problem does not disrupt the
hotels' reservation systems.
Forward Looking Statements
When used in this and in future filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral statements made
with the approval of an authorized executive officer of the Company, the words
or phrases "will likely result," "expects," "plans," "will continue," "is
anticipated," "estimated," "project" or "outlook" or similar expressions
(including confirmations by an authorized executive officer of the Company of
any such expressions made by a third party with respect to the Company) are
intended to identify forward-looking statements. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements, each
of which speak only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. Such
risks and other aspects of the Company's business and operations are described
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The Company has no obligation to publicly release the result of any
revisions that may be made to any forward-looking statements to reflect
anticipated or unanticipated events or circumstances occurring after the date of
such statements.
PART II--OTHER INFORMATION
Items 1 to 5
None
Item 6 -- Exhibits and Reports on Form 8-K.
A. Exhibits
Exhibit 27: Financial Data Schedule
B. Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
JANUS HOTELS AND RESORTS, INC.
Dated: November 15, 1999 /s/James E. Bishop
----------------- ----------------------------------
James E. Bishop
President
Dated: November 15, 1999 /s/ Richard A. Tonges
----------------- ----------------------------------
Richard A. Tonges
Treasurer and Vice President of Finance
(Principal Financial and Accounting
Officer)
12
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<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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