U.S. 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 September 30, 2000
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.
(Exact name of registrant as specified 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, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No | |
Number of shares of common stock outstanding as of November 8, 2000: 8,670,592
1
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JANUS HOTELS AND RESORTS, INC.
FORM 10-Q
<TABLE>
<CAPTION>
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
Part I. Financial Information Page No.
--------
<S> <C> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets As Of September 30, 2000
and December 31, 1999 3
Unaudited Consolidated Statements Of Operations For The Three
Months Ended September 30, 2000 and 1999 4
Unaudited Consolidated Statements Of Operations For The Nine
Months Ended September 30, 2000 and 1999 5
Unaudited Consolidated Statements Of Cash Flows For The Nine
Months ended September 30, 2000 and 1999 6
Notes To Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis Of Financial Condition and
Results of Operations 8
Part II. Other Information 10
Signature Page 11
</TABLE>
2
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JANUS HOTELS AND RESORTS, INC.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31,1999
September 30, December 31,
2000 1999
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,698,706 $ 8,859,888
Restricted cash 1,833,121 1,251,297
Accounts receivable 2,478,612 1,743,241
Current portion of notes receivable 94,557 182,226
Other current assets 210,180 212,082
----------- -----------
Total current assets 14,315,176 12,248,734
----------- -----------
Property held for sale 12,659,918 12,641,199
Property and equipment, net 81,682,546 84,059,513
Mortgage notes receivable 3,329,360 3,392,709
Goodwill, net 7,382,992 7,542,376
Deferred tax asset 1,265,000 2,566,000
Other assets 5,807,279 5,241,958
----------- -----------
$126,442,271 $127,692,489
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 3,722,021 $ 3,776,846
Accounts payable 2,267,101 2,215,038
Accrued expenses 2,236,684 1,959,960
----------- -----------
Total current liabilities 8,225,806 7,951,844
----------- -----------
Long-term debt, net of current portion 65,398,990 67,933,460
Deferred tax liabilities 2,250,275 2,345,275
Minority interest 2,599,594 2,465,995
Stockholders' equity:
Preferred stock, series B; par value $0.01 per share; 20,000 shares authorized;
16,788.08 shares issued and outstanding 168 168
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 52,582,257 52,582,257
Accumulated deficit (3,317,153) (4,288,844)
Treasury stock, 3,212,128 common shares, at cost (1,416,499) (1,416,499)
----------- -----------
Total stockholders' equity 47,967,606 46,995,915
----------- -----------
$126,442,271 $127,692,489
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
3
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JANUS HOTELS AND RESORTS, INC.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
---------- ----------
<S> <C> <C>
Revenues:
Room and related services $11,311,303 $12,689,305
Food and beverage 2,678,693 2,793,761
Management fees 795,872 517,214
Other 322,968 247,481
---------- ----------
Total revenues 15,108,836 16,247,761
---------- ----------
Operating expenses:
Direct:
Room and related services 2,696,636 2,867,023
Food and beverage 2,244,190 2,194,057
Selling and general 524,612 534,879
---------- ----------
Total direct expenses 5,465,438 5,595,959
---------- ----------
Occupancy expenses 1,676,763 1,793,557
Selling, general and administrative expenses 3,209,457 3,291,592
Depreciation 819,815 292,152
Amortization 102,646 80,095
---------- ----------
Total operating expenses 11,274,119 11,053,355
---------- ----------
Operating income 3,834,717 5,194,406
Other income (expense):
Interest expense (1,506,212) (1,628,050)
Interest income 186,987 161,856
Other (75,000) (168,111)
---------- ----------
Income from continuing operations before income taxes and minority interest 2,440,492 3,560,101
Provision for income taxes 986,000 651,861
---------- ----------
Income from continuing operations before minority interest 1,454,492 2,908,240
Minority interest 95,087 59,940
---------- ----------
Income from continuing operations 1,359,405 2,848,300
Gain (loss) on disposal of discontinued operations, net of taxes 18,415 (128,547)
---------- ----------
Net income 1,377,820 2,719,753
Less preferred dividend requirement 317,364 313,914
---------- ----------
Net income applicable to common stock $ 1,060,456 $ 2,405,839
========== ==========
Basic income per common share:
Income from continuing operations $0.12 $0.29
Gain (loss) on disposal of discontinued operations - (0.01)
---- ----
Net income $0.12 $0.28
==== ====
Diluted income per common share:
Income from continuing operations $0.12 $0.29
Gain (loss) on disposal of discontinued operations - (0.01)
---- ----
Net income $0.12 $0.28
==== ====
Weighted average common shares:
Basic 8,671,092 8,671,092
========= =========
Diluted 8,671,092 8,671,092
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
4
<PAGE>
JANUS HOTELS AND RESORTS, INC.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Room and related services $28,302,308 $30,423,220
Food and beverage 7,870,394 7,878,243
Management fees 2,459,869 1,540,172
Other 802,271 664,624
---------- ----------
Total revenues 39,434,842 40,506,259
---------- ----------
Operating expenses:
Direct:
Room and related services 6,960,934 7,224,122
Food and beverage 6,171,912 6,154,563
Selling and general 1,584,047 1,539,837
---------- ----------
Total direct expenses 14,716,893 14,918,522
---------- ----------
Occupancy expenses 4,808,950 5,137,107
Selling, general and administrative expenses 8,672,086 8,800,329
Severance arrangement of former president 500,000 -
Depreciation 2,498,015 2,891,973
Amortization 272,457 237,602
---------- ----------
Total operating expenses 31,468,401 31,985,533
---------- ----------
Operating income 7,966,441 8,520,726
Other income (expense):
Interest expense (4,581,473) (4,975,254)
Interest income 559,382 526,024
Other (45,107) (163,332)
---------- ----------
Income from continuing operations before income taxes and minority interest 3,899,243 3,908,164
Provision for income taxes (See Note 4) 1,902,000 651,861
---------- ----------
Income from continuing operations before minority interest 1,997,243 3,256,303
Minority interest 133,599 94,022
---------- ----------
Income from continuing operations 1,863,644 3,162,281
Gain (loss) on disposal of discontinued operations, net of taxes 53,244 (128,547)
---------- ----------
Net income 1,916,888 3,033,734
Less preferred dividend requirement 945,197 896,630
---------- ----------
Net income applicable to common stock $ 971,691 $ 2,137,104
========== ==========
Basic income per common share:
Income from continuing operations $0.11 $0.26
Gain (loss) on disposal of discontinued operations - (0.01)
---- ----
Net income $0.11 $0.25
==== ====
Diluted income per common share:
Income from continuing operations $0.11 $0.26
Gain (loss) on disposal of discontinued operations - (0.01)
---- ----
Net income $0.11 $0.25
==== ====
Weighted average common shares:
Basic 8,671,092 8,674,975
========= =========
Diluted 8,671,092 8,674,975
========= =========
</TABLE>
See notes to unaudited consolidated financial statements.
5
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JANUS HOTELS AND RESORTS, INC.
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
---------- -----------
<S> <C> <C>
Operating activities:
Net income $1,916,888 $ 3,033,734
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,498,015 2,891,973
Amortization of intangible assets 272,457 237,602
Deferred taxes 1,206,000 259,171
Minority Interest 133,599 94,022
Loss on sale of properties 45,107 168,110
Discontinued operations - 143,628
Changes in operating assets and liabilities:
Accounts receivable (735,371) (1,244,652)
Other current assets 1,902 29,220
Other assets (688,397) 786,830
Accounts payable and accrued expenses 166,832 817,932
--------- ----------
Net cash provided by operating activities 4,817,032 7,217,570
--------- ----------
Investing activities:
Acquisition of hospitality business, net of noncash consideration and cash acquired - 462,008
Increase in notes receivable (161,328) (250,000)
Purchases of property and equipment (2,252,144) (3,992,024)
Proceeds from sale of property 2,700,000 2,250,000
Collections of notes receivable 237,346 348,703
--------- ----------
Net cash provided by (used in) investing activities 523,874 (1,181,313)
--------- ----------
Financing activities:
Dividends paid (945,197) (896,630)
Increase in restricted cash (581,824) (1,956,631)
Repayments of long-term borrowings (2,975,067) (5,072,000)
--------- ----------
Net cash used in financing activities (4,502,088) (7,925,261)
--------- ----------
Increase (decrease) in cash and cash equivalents 838,818 (1,889,004)
Cash and cash equivalents, beginning of period 8,859,888 12,383,741
--------- ----------
Cash and cash equivalents, end of period $9,698,706 $10,494,737
========= ==========
Supplemental disclosure of cash flow data:
Interest paid $4,581,473 $ 4,975,254
========= ==========
Taxes paid $ 477,800 $ -
========= ==========
Noncash investing and financing transactions:
Acquisitions of equipment through capital leases $ 385,772 $ -
========= ==========
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. and subsidiaries (the "Company" or
"Janus") as of September 30, 2000, its results of operations for the
three months and nine months ended September 30, 2000 and 1999 and its
cash flows for the nine months ended September 30, 2000. Certain terms
used herein are defined in the audited consolidated financial
statements of the Company for the year ended December 31, 1999 (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, 2000
are not necessarily indicative of the results of operations for the
full year ending December 31, 2000.
Note 2 -- Organization:
As of September 30, 2000, the Company owned and operated fifteen hotels
(of which thirteen are wholly-owned, one is 85% owned and one is 75%
owned) and a hotel management company, which manages hotels for
unrelated parties.
Note 3 - Resignation of the Company President:
Effective April 30, 2000, the President of the Company resigned. The
cost of the severance package was a cash payment of $500,000.
Note 4 - Disposal of Hotel Property:
During the third quarter of 2000, an early payoff of a note receivable
was received related to the prior year sale of Knights Inn Westerville.
The early payoff reflected a $75,000 discount which was included in
other income.
On June 15, 2000, the Company disposed of a hotel property located in
Cincinnati, Ohio. The hotel was sold for cash of $2,700,000 and
resulted in a gain of $29,893 for financial reporting purposes. For tax
purposes, this transaction produced an estimated gain of approximately
$978,000 that cannot be offset by the Company's federal net operating
loss carryforward. As a result, the tax provision for the nine months
ended September 30, 2000 includes $333,000 of currently payable federal
income taxes related to this transaction.
Note 5 -- 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.
Note 6 - Common Stock Repurchase Program
On September 22, 2000, the Company's board of directors authorized the
repurchase of up to 1,000,000 shares of the Company's common stock. The
repurchases will be made in the open market at the discretion of
Company management over a period of one year. As of September 30, 2000,
no shares were repurchased under the program.
7
<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 $1,377,820 for the three months ended September
30, 2000 compared to net income of $2,719,753 for the three months ended
September 30, 1999.The Company had net income of $1,916,888 for the nine months
ended September 30, 2000 compared to net income of $3,033,734 for the nine
months ended September 30, 1999.
Three Months Ended September 30, 2000 Compared to the Three Months Ended
September 30, 1999
Room and related services revenue decreased 10.9% to $11,311,303 in 2000 from
$12,689,305 in 1999. The decrease was attributable to properties disposed of in
2000 and 1999, and softness in the Midwestern markets. The average daily room
rate (excluding disposed properties) decreased to $68.85 for 2000 from $70.20 in
1999. Occupancy (excluding disposed properties) increased in 2000 to 72.0% from
70.5% in 1999. Excluding the properties disposed of in 2000 and 1999, room and
related services revenue decreased 3.4%.
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 decreased 4.1% to $2,678,693 in 2000 from $2,793,761 in 1999. This
decrease is related primarily to a decrease in walk-in business and catering
sales. The properties disposed of in 2000 and 1999 had no effect on food and
beverage revenues.
Management fee income increased 53.9% to $795,872 in 2000 from $517,214 in 1999.
This increase is primarily due to the addition of new third party management
contracts.
Total direct operating expenses decreased 2.3% to $5,465,438 in 2000 from
$5,595,959 in 1999 and increased as a percentage of room and related services
and food and beverage revenues to 39.1% from 36.2%. Excluding the properties
disposed of in 2000 and 1999, total direct operating expenses increased 3.0%
primarily due to higher food and payroll costs.
Occupancy expenses decreased 6.5% to $1,676,763 from $1,793,557 in 1999.
Excluding the properties disposed of in 2000 and 1999, occupancy expenses
increased 2.7% as maintenance projects at various hotels were completed and
property taxes increased.
Selling, general and administrative expenses decreased 2.5% to $3,209,457 in
2000 from $3,291,592 in 1999 and increased as a percentage of total revenues to
21.2% from 20.3%. Excluding the properties disposed of in 2000 and 1999,
selling, general and administrative expenses increased 2.1%, as additional
management personnel were required to manage the new hotels under contract.
Depreciation increased by $527,663 in 2000 from $292,152 in 1999. The increase
was primarily attributable to the credit adjustments made in 1999 for the change
in estimated useful lives and the modification of the purchase allocation for
four hotel properties based on an acquisition appraisal.
Interest income increased to $186,987 in 2000 from $161,856 in 1999.
Interest expense decreased to $1,506,212 in 2000 from $1,628,050 in 1999. The
decrease was attributable to the properties disposed of in 2000 and 1999 and
traditional amortization.
Minority interest increased to $95,087 in 2000 from $59,940 in 1999 reflecting
the results of operations from the Kings Dominion partnership and the Days Inn
Pompano hotel in 2000.
Nine Months Ended September 30, 2000 Compared to the Nine Months Ended September
30, 1999
Room and related services revenue decreased 7.0% to $28,302,308 in 2000 from
$30,423,220 in 1999. The decrease was attributable primarily to properties
disposed of in 2000 and 1999. The average daily room rate (excluding disposed
properties) decreased to $63.73 for 2000 from $64.39 in 1999. Occupancy
(excluding disposed properties) decreased in 2000 to 64.2% from 64.4%. Excluding
the properties disposed of in 2000 and 1999, room and related services revenue
decreased 0.8%.
8
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Food and beverage revenues decreased 0.1% to $7,870,394 in 2000 from $7,878,243
in 1999. This decrease is related primarily to decreased occupancy and catering
sales. The properties disposed of in 2000 and 1999 had no effect on food and
beverage revenues.
Management fee income increased 59.7% to $2,459,869 in 2000 from $1,540,172 in
1999. This increase is primarily due to the addition of new third party
management contracts. In addition, one-time fees of approximately $124,000 were
realized in the first nine months of 2000.
Total direct operating expenses decreased 1.4% to $14,716,893 in 2000 from
$14,918,522 in 1999 and increased as a percentage of room and related services
and food and beverage revenues to 40.7% from 39.0%. Excluding the properties
disposed of in 2000 and 1999, total direct operating expenses increased 2.7%.
Occupancy expenses decreased 6.4% to $4,808,950 from $5,137,107 in 1999.
Excluding the properties disposed of in 2000 and 1999, occupancy expenses
increased 1.3% as maintenance projects at various hotels were completed and
property taxes increased.
Selling, general and administrative expenses decreased 1.5% to $8,672,086 in
2000 from $8,800,329 in 1999 and increased as a percentage of total revenues to
22.0% from 21.7%. Excluding the properties disposed of in 2000 and 1999,
selling, general and administrative expenses increased 2.1% as additional
regional management personnel were required to manage the new hotels under
contract.
Depreciation decreased by $393,958 in 2000 from $2,891,973 in 1999. The decrease
was primarily attributable to the properties disposed of in 2000 and 1999, and
the cessation of depreciation on one hotel property held for sale.
Interest income increased to $559,382 in 2000 from $526,024 in 1999.
Interest expense decreased to $4,581,473 in 2000 from $4,975,254 in 1999. The
decrease was attributable to the properties disposed of in 2000 and 1999,
minimal short-term borrowings in the first nine months of 2000 and traditional
amortization.
The provision for income taxes in the first nine months of 2000 includes
$333,000 related to the disposal of a hotel property in the second quarter of
2000. The taxable gain realized from the transaction cannot be offset by the
Company's net operating loss carryforward.
Minority interest increased to $133,599 in 2000 from $94,022 in 1999 reflecting
the results of operations from the Kings Dominion partnership and the Days Inn
Pompano hotel in 2000.
Liquidity and Capital Resources
Total assets decreased to $126,442,271 at September 30, 2000 from $127,692,489
at December 31, 1999.
Net cash provided by operating activities decreased to $4,817,032 in the nine
months ended September 30, 2000 from $7,217,570 in the nine months ended
September 30, 1999. The decrease is primarily the result of lower net income,
lower depreciation and the increase in accounts receivable.
Net cash provided by investing activities was $523,874 in the nine months ended
September 30, 2000 compared to cash used in investing activities of $1,181,313
in the nine months ended September 30, 1999. The Company plans to spend an
additional $224,000 on capital improvements during the remainder of 2000.
Net cash used by financing activities was $4,502,088 in the nine months ended
September 30, 2000 compared to $7,925,261 used by financing activities in the
nine months ended September 30, 1999. The change is the result of lower debt
repayments and a smaller increase in restricted cash. On September 22, 2000, the
Company's board of directors authorized the repurchase of up to 1,000,000 shares
of the Company's common stock. The repurchases will be made with operating funds
in the open market at the discretion of Company management over a period of one
year. As of September 30, 2000, no shares were repurchased under the program.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
decreased to $10,736,913 during the nine months ended September 30, 2000
compared to $11,650,301 for the nine months ended September 30, 1999. EBITDA is
9
<PAGE>
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
aggregate lines of credit totaling $2,200,000, which had no amount outstanding
at September 30, 2000.
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.
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.
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
There were no reports on Form 8-K filed during the three months ended
September 30, 2000.
10
<PAGE>
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.
JANUS HOTELS AND RESORTS, INC.
Dated: November 14, 2000 /s/ Richard A. Tonges
----------------- ---------------------------------------
Richard A. Tonges
Treasurer and Vice President of Finance
(Principal Financial and Accounting
Officer)
11
