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 March 31, 2000.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number: 33-78866
----------------------
MOA HOSPITALITY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0166914
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
----------------------
701 Lee Street, Suite 1000
Des Plaines, Illinois 60016
(847) 803-1200
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ ] Yes [ X] No
Number of shares of Common Stock, $.01 par value outstanding as of
December 1, 2000: 800,000
<PAGE>
INDEX TO FORM 10-Q
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed consolidated balance sheets - 2
March 31, 2000 (unaudited) and December 31, 1999.
Condensed consolidated statements of operations - 3
Three months ended March 31, 2000 and 1999 (unaudited).
Condensed consolidated statements of cash flows - 4
Three months ended March 31, 2000 and 1999 (unaudited).
Notes to condensed consolidated financial statements - 5
March 31, 2000 (unaudited).
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General 8
Results of Operations 9
Liquidity and Capital Resources 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 5,973 $ 4,422
Accounts receivable from property operations 1,808 1,814
Operating supplies and prepaid expenses 2,072 1,968
Current portion of mortgage and notes receivable 675 1,608
----------- ------------
Total Current Assets 10,528 9,812
Investment property:
Operating properties,
net of accumulated depreciation 250,302 256,609
Land held for development 5,248 4,938
----------- ------------
Total investment property 255,550 261,547
Other Assets:
Deposits and other assets 5,977 5,532
Mortgage and other notes receivable,
less current portion 27,291 23,448
Financing and other deferred costs, net of
accumulated amortization of $11,654 in 2000
and $10,925 in 1999 12,882 12,866
----------- ------------
Total Other Assets 46,150 41,846
----------- ------------
Total Assets $ 312,228 $ 313,205
=========== ============
LIABILITIES, MINORITY INTERESTS AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable $ 1,917 $ 1,714
Real estate taxes payable 2,006 2,018
Accrued interest payable 4,024 2,713
Other accounts payable and accrued expenses 8,172 10,194
Other liabilities - tenant sites 17,647 11,501
Current portion of long-term debt 24,290 13,154
----------- ------------
Total Current Liabilities 58,056 41,294
Net deferred tax liability 310 105
Long-term debt, less current portion:
Mortgage and other notes payable 204,345 211,525
12% Senior Subordinated Notes, net of unamortized
discount of $1,025 in 2000 and $1,401 in 1999 33,380 43,501
----------- ------------
Total Long-term debt, excluding current portion 237,725 255,026
----------- ------------
Total Liabilities 296,091 296,425
----------- ------------
Minority Interests 1,687 1,709
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 (852) (231)
----------- ------------
Total stockholders' equity 14,450 15,071
----------- ------------
Total liabilities and Stockholders' Equity $ 312,228 $ 313,205
=========== ============
See accompanying notes to condensed consolidated financial statements.
<PAGE>
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except share data)
Three Months Ended
March 31
---------------------------
2000 1999
----------- -----------
Revenues:
Motel operating revenues $ 14,658 $ 20,975
Lease revenues 1,894 229
Vending revenues 223 184
Other revenues 671 344
----------- -----------
Total revenues 17,446 21,732
Costs and expenses:
Motel operating expenses 9,666 13,377
Marketing and royalty fees 1,055 1,435
General and administrative 1,374 2,643
Lease expenses 120 3
Vending expenses 190 142
Depreciation and amortization 3,636 3,611
----------- -----------
Total direct expenses 16,041 21,211
----------- -----------
Net operating income 1,405 521
Interest expense 6,527 7,306
----------- -----------
Loss from operations (5,122) (6,785)
Minority interests 22 13
Gain on sale of properties 391 374
----------- -----------
Loss before income taxes
and extraordinary item (4,709) (6,398)
Income tax benefit (1,833) (2,490)
----------- -----------
Loss before extraordinary item (2,876) (3,908)
Gain on early extinguishment of debt, net of
applicable income taxes of $1,437 2,255 -
----------- -----------
Net loss $ (621) $ (3,908)
=========== ===========
Net loss per common share:
Loss before extraordinary item (3.60) (4.89)
Extraordinary item 2.82 -
----------- -----------
Net loss per common share (basic and diluted) $ (0.78) $ (4.89)
=========== ===========
Weighted average number of
common shares outstanding 800,000 800,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
MOA HOSPITALITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
2000 1999
---------- -----------
<S> <C> <C>
Cash flows used in operating activities:
Net loss $ (621) $ (3,908)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation, amortization and accretion of
discount on notes 3,655 3,706
Minority interests of others in net income (loss)
from operations (22) (13)
Deferred income taxes 205 (24)
Gain on early extinguishment of debt (3,692) -
Gain on sale of properties (391) (374)
Change in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 6 (510)
Operating supplies, prepaid expenses,
deposits and other assets (975) (6,588)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (2,016) 378
Accrued interest payable 1,311 2,420
---------- -----------
Net cash used in operating activities (2,540) (4,913)
Cash flows provided by investing activities:
Acquisition and development of investment properties (311) (16)
Refurbishment of investment properties (1,781) (2,306)
Net proceeds from sale of investment properties 1,540 2,467
Cash restricted for refurbishment of properties (177) 1,426
Collections on mortgage and other notes receivable 1,117 106
---------- -----------
Net cash provided by investing activities 388 1,677
Cash flows provided by financing activities:
Proceeds from notes payable 6,579 36,880
Repayment of notes payable (2,623) (32,566)
Distributions to minority interests - -
Deferred financing costs (253) (1,070)
---------- -----------
Net cash provided by financing activities 3,703 3,244
---------- -----------
Net increase in cash and cash equivalents 1,551 8
Cash and cash equivalents at beginning of period 4,422 19,582
---------- -----------
Cash and cash equivalents at end of period $ 5,973 $ 19,590
========== ===========
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 5,158 $ 4,780
========== ===========
Cash paid (net of refunds received) during the
period for income taxes $ - $ (268)
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
MOA HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
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 period ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in MOA Hospitality, Inc. and Subsidiaries' Annual Report on
Form 10-K for the year ended December 31, 1999. The terms "MOA" and the
"Company" mean MOA Hospitality, Inc. and its subsidiaries. Certain
reclassifications of prior-period amounts have been made to conform with
current-period presentation which have not changed operations or stockholders'
equity.
2. Divestitures
In January through March 2000, the Company leased seventeen of its
operating properties to third party operators under terms similar to previous
operating leases executed by the Company.
In January through March 2000, the Company sold three of its lodging
facilities for approximately $5.8 million consisting of $1.8 million of cash and
$4.0 million in notes receivable. One property was sold for gain of $391,000.
The other two properties were sold at a loss in the amount of $808,000 that was
previously recorded at December 31, 1999 as part of the impairment loss
provision.
In April through November 30, 2000, the Company leased an additional
seventeen of its lodging facilities to third party operators under terms similar
to previous operating leases executed by the Company.
In April through November 30, 2000, the Company sold four of its
lodging facilities for approximately $12.7 million consisting of $9.1 million of
cash and $3.6 million in notes receivable. The Company also sold a vacant parcel
of land for its carrying value.
3. Mortgage and Other Notes Payable
In January 2000, the Company borrowed $1.7 million at prime
plus .5% with monthly principal payments of $212,500 due October 1, 2000.
In February 2000, the Company issued a promissory note in the
amount of $460,000 for a parcel of land in Cody, WY bearing no interest and due
July 15, 2000.
In March 2000, the Company repurchased an additional $10.5
million of the 12% Senior Subordinated Notes from an affiliate for a pre-tax
gain of $3.7. As part of the transaction the Company assumed a $4.4 million
margin account loan with an annual interest rate of 9%.
In April 2000, the Company borrowed $2,100,000 at 9.25% with
monthly principal and interest payments of $19,408 due in seven years, secured
by one property in Merrimack, New Hampshire.
In May 2000, the Company borrowed $3,300,000 at 10.5% for four
years with monthly principal and interest payments of
$84,491.
4. Income Taxes
Income tax expense differs from the amounts computed by applying the
U.S. federal income tax rate of 34% to income before income taxes principally as
a result of state income taxes.
5. Contingencies
The Company is involved in various other legal proceedings
arising in the ordinary course of business. The Company does not believe that
any of these actions, either individually or in the aggregate, will have a
material adverse effect on the Company's business, results of operations or
financial condition.
The Company remains contingently liable on a $2.3 million note
arising from a sale of a motel in 1997 in a transaction where the purchaser
assumed an existing mortgage loan secured by the property.
<PAGE>
6. Segments
As of March 31, 2000 the Company, directly and through
subsidiaries, owned 123 lodging facilities in 39 states. The Company owns a 100%
interest in all but two of its properties. The Company operates sixty-three of
its motels and leases sixty of its motels to third party tenants pursuant to
operating leases. The Company separately evaluates the performance of each of
its motels.
Three months ended
March 31
----------------------------
2000 1999
---------- -----------
Motel operations:
Motel operating revenue:
Room revenues $ 13,436 $ 19,605
Ancillary motel revenues 1,222 1,370
---------- -----------
Total motel operating revenues 14,658 20,975
Motel costs and expenses:
Motel operating expenses 9,666 13,235
Marketing and royalty fees 1,055 1,435
Depreciation and amortization 2,379 3,153
---------- -----------
Total motel direct expenses 13,100 17,823
---------- -----------
1,558 3,152
Lease Operations
Lease revenues 1,894 229
Lease expenses 120 3
Depreciation and amortization 1,074 205
---------- -----------
700 21
Vending Operations
Vending revenues 223 184
Vending expenses 190 142
Depreciation and amortization 47 52
---------- -----------
(14) (10)
Corporate Operations
Other revenues 671 344
General and administrative expenses:
Management Company Operations 1,102 2,422
Construction/Acquisition and Divestiture 154 237
Vending - general and administrative 118 126
---------- -----------
Total general and administrative expenses 1,374 2,785
Depreciation and amortization 136 201
---------- -----------
(839) (2,642)
---------- -----------
Net operating income 1,405 521
Interest expense 6,527 7,306
---------- -----------
Loss from operations (5,122) (6,785)
Minority interests 22 13
Gain on sale of properties 391 374
---------- -----------
Loss before income taxes (4,709) (6,398)
Income tax expense (benefit) (1,833) (2,490)
---------- -----------
Net loss before extraordinary item (2,876) (3,908)
Gain on early extinguishment of debt 2,255 -
---------- -----------
Net Loss $ (621) $ (3,908)
========== ===========
Total Assets:
Motel Operations $ 179,700 $ 276,626
Lease Operations 97,082 19,546
Other Operations 35,446 17,033
---------- -----------
$ 312,228 $ 313,205
========== ===========
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONSTITUTE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND AS SUCH, SPEAK ONLY AS OF THE DATE MADE. SUCH FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS
WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY
TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE,
AMONG OTHERS, THE FOLLOWING: THE COMPANY'S ABILITY TO OBTAIN FINANCING,
COMPETITION, INTEREST RATE FLUCTUATIONS, OR GENERAL BUSINESS AND ECONOMIC
CONDITIONS.
THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM CONDENSED
CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES
THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL OPERATING RESULTS
PRESENTED BELOW FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 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.
<PAGE>
Three Months Ended March 31, 2000 Compared to the Three Months Ended
March 31, 1999
The following chart presents certain historical operating results and
statistics discussed herein and is being provided as a supplement to the
condensed consolidated financial statements presented elsewhere herein. (certain
of the 1999 numbers have been reclassified to conform to the 2000 presentation):
<TABLE>
<CAPTION>
Supplemental Operating Results and Statistics
---------------------------------------------------------------------
(unaudited)
Three Months Ended March 31
---------------------------------------------------------------------
Motels Owned Acquisitions/
Both Periods Divestitures Consolidated
------------------- ------------------ -----------------------
2000 1999 2000 1999 2000 1999
-------- -------- --------- -------- ---------- ----------
(dollars in thousands, except Other data)
<S> <C> <C> <C> <C> <C> <C>
Motel operations:
Motel operating revenues:
Room revenues $12,207 $11,194 $ 1,229 $ 8,411 $ 13,436 $ 19,605
Ancillary motel revenues 1,045 942 177 428 1,222 1,370
-------- -------- --------- -------- ---------- ----------
Total motel operating revenues 13,252 12,136 1,406 8,839 14,658 20,975
Motel costs and expenses:
Motel operating expenses 7,896 7,405 1,770 5,830 9,666 13,235
Marketing and royalty fees 931 812 124 623 1,055 1,435
Depreciation and amortization 1,798 1,690 581 1,463 2,379 3,153
-------- -------- --------- -------- ---------- ----------
Total motel direct expenses 10,625 9,907 2,475 7,916 13,100 17,823
-------- -------- --------- -------- ---------- ----------
$ 2,627 $ 2,229 $ (1,069) $ 923 1,558 3,152
======== ======== ========= ========
Lease operations:
Lease revenues 1,894 229
Lease operating expenses 120 3
Depreciation and amortization 1,074 205
---------- ----------
700 21
Vending operations:
Vending operating revenues 223 184
Vending operating expenses 190 142
Depreciation and amortization 47 52
---------- ----------
(14) (10)
Corporate operations:
Other revenues, net 671 344
General and administrative expenses:
Management Company Operations 1,102 2,422
Construction/Acquisition
and Divestiture 154 237
Vending general and administrative 118 126
---------- ----------
Total general and administrative expenses 1,374 2,785
Depreciation and amortization 136 201
---------- ----------
(839) (2,642)
---------- ----------
Net operating income $ 1,405 $ 521
========== ==========
Other data:
Number of motels at period end (5) 62 62 1 60 63 122
Number of rooms at period end (5) 5,370 5,390 70 4,339 5,440 9,729
Occupancy percentage (5) 58.50% 55.21% 50.20% 55.18% 58.39% 54.99%
ADR (1) (5) $ 42.69 $ 41.79 $ 47.80 $ 36.70 $ 46.47 $ 38.87
REVPAR (2) (5) $ 27.11 $ 25.01 $ 24.98 $ 21.28 $ 29.60 $ 22.87
Net operating income margin (3) 8.77% 2.44%
Net motel revenue margin (4) (5) 34.82% 33.97% 6.39% 28.37% 29.30% 32.16%
</TABLE>
-----------------------------------------
(1) ADR represents room revenues divided by the total number of rooms occupied.
(2) REVPAR represents total motel operating revenues divided by the total number
of rooms available.
(3) Net operating income margin represents net operating income divided by
total motel operating revenues plus lease revenues plus vending revenues
plus corporate other revenues.
(4) Net motel revenue margin represents total motel operating revenues less
motel operating expenses and marketing and royalty fees, divided by motel
room revenues.
(5) At March 31, 2000 and for the three months then ended, excludes amounts
related to the 60 motels which are leased to third party tenants.
<PAGE>
Total revenues consist principally of motel operating revenues. Motel
operating revenues are derived from room rentals and ancillary motel revenues
such as charges to guests for food and beverage service, long distance telephone
calls, and fax machine use. Lease revenues are derived from properties leased to
third parties. Vending revenues are derived from vending machines used in the
motels and also vending machines placed in non owned locations. Other revenues
include interest income, and other miscellaneous income. Total revenues
decreased to $17,446,000 for the three months ended March 31, 2000 from
$21,732,000 for the three months ended March 31, 1999, a decrease of $4,287,000
or 19.7%.
Motel revenues decreased to $14,658,000 for the three months ended
March 31, 2000 from $20,975,000 for the three months ended March 31, 1999, a
decrease of $6,317,000 or 30.1%. The motel revenues for motels owned during both
periods increased approximately $1,116,000 and revenues for motels acquired and
divested since January 1, 1999 decreased by $7,433,000. Motel revenues for
motels owned during both periods increased 9.2%. The increase in motel revenues
for motels owned during both periods was attributable to a combined increase in
the average daily rate ("ADR") and the occupancy rate. The ADR for the motels
owned during both periods increased to $42.69 for the three months ended March
31, 2000 from $41.79 for the three months ended March 31, 1999, an increase of
$0.90 or 2.2%. The occupancy for the motels owned during both periods increased
to 58.5% for the three months ended March 31, 2000 from 55.21% for the three
months ended March 31, 1999, an increase of 3.3%. Revenue per available room
("REVPAR") for motels owned during both periods increased to $27.11 for the
three months ended March 31, 2000 from $25.01 for the three months ended March
31, 1999, an increase of $2.10 or 8.4%. The acquired and divested motels had an
occupancy percentage of 50.2%, an ADR of $47.80 and REVPAR of $24.98 for the
period, which they were owned by the Company in 2000.
Motel operating expenses include payroll and related costs, utilities,
repairs and maintenance, property taxes, insurance, linens and other operating
supplies. Motel operating expenses decreased to $9,666,000 for the three months
ended March 31, 2000 from $13,235,000 for the three months ended March 31, 1999,
a net decrease of $3,569,000 or 27.0%. Motel operating expenses for motels
acquired and divested since January 1, 1999 decreased to $1,770,000 for the
three months ended March 31, 2000 from $5,830,000 for the three months ended
March 31, 1999, a decrease of $4,060,000 or 69.6%. The decrease was partially
offset by an increase of $491,000 or 6.6% in the costs of operating the motels
owned during both periods. The cost of operating motels owned during both
periods increased to $7,895,000 for the three months ended March 31, 2000 from
$7,405,000 for the three months ended March 31, 1999. The increase in operating
costs is principally due to increased labor and related costs and an increase in
repairs and maintenance expenditures. Motel operating expenses as a percentage
of motel revenues increased to 65.9% for the three months ended March 31, 2000
from 63.1% for the three months ended March 31, 1999. Motel operating expenses
as a percentage of motel revenues for the motels owned in both periods decreased
to 59.6% for the three months ended March 31, 2000 from 61.0% for the three
months ended March 31, 1999.
Marketing and royalty fees include media advertising, billboard rental
expense, advertising fund contributions and royalty charges paid to franchisors
and other related marketing expenses. Marketing and royalty fees decreased to
$1,055,000 for the three months ended March 31, 2000 from $1,435,000 for the
three months ended March 31, 1999, a decrease of $380,000 or 26.5%. The
marketing and royalty fees for motels owned during both periods increased to
$931,000 for the three months ended March 31, 2000 from $812,000 for the three
months ended March 31, 1999, an increase of $119,000 or 14.7%. For the motels
owned during both periods, marketing and royalty fees as a percentage of room
revenues increased to 7.6% for the three months ended March 31, 2000 from 7.3%
for the three months ended March 31, 1999. The increase in marketing and royalty
fees for motels owned in both periods are principally due to an increase in
motel room revenues. Marketing and royalty fees for motels acquired and divested
since January 1, 1999 decreased to $124,000 for the three months ended March 31,
2000 from $623,000 for the three months ended March 31, 1999. Franchise fees
declined due to the leasing of properties to third parties.
<PAGE>
Lease operations increased to $700,000 for the three months ended March
31, 2000 from $21,000 for the three months ended March 31, 1999, an increase of
$679,000, which results from an increase to 60 leased properties with an asset
value of $97,082,000 at March 31, 2000 compared with 10 leased properties with
an asset value of $19,546,000 at March 31, 1999.
Vending operations decreased to ($14,000) for the three months ended
March 31, 2000 from ($10,000) for the three months ended March 31, 1999, a
decrease of $4,000 or 40.0 %
Corporate general and administrative expenses are segregated by the
Company into three separate areas: Management Company Operations,
Construction/Acquisition and Divestiture Division and Vending general and
administrative. Included in the Management Company Operations, which is the
division responsible for the motel operations, are the costs associated with
training, marketing, purchasing, administrative support, property related legal
and accounting costs. The major components of these costs are salaries, wages
and related expenses, travel, rent and other administrative expenses. The
general and administrative expenses for the Management Company Operations
decreased $1,320,000 to $1,102,000 for the three months ended March 31, 2000
from $2,422,000 for the three months ended March 31, 1999, an decrease of 54.5%.
The general and administrative expenses associated with Construction/Acquisition
and Divestiture Division decreased $83,000 from $237,000 for the three months
ended March 31, 1999 to $154,000 for the three months ended March 31, 2000.
Vending General and Administrative expenses decreased $8,000 to $118,000 for the
three months ended March 31, 2000 from $126,000 for the three months ended March
31, 1999. As a percentage of total motel operating revenues, Management Company
Operations general and administrative expenses was 7.5% for the three months
ended March 31, 2000 and 11.5% for the three months ended March 31, 1999.
Depreciation and amortization increased to $3,636,000 for the three
months ended March 31, 2000 from $3,611,000 for the three months ended March 31,
1999, a net increase of $25,000 or .7%.
Net operating income increased to $1,405,000 for the three months ended
March 31, 2000 from $521,000 for the three months ended March 31, 1999, an
increase of $884,000 or 169.7%. The increase in net operating income included a
decrease of $2,368,000 in net motel revenues (motel revenues less motel
operating expenses and marketing and royalty fees). Of the $2,368,000 decrease
in net motel revenues, an increase of $506,000 resulted from the motels owned
during both periods or an increase of 12.9%. Net motel revenues for motels
acquired and divested since January 1, 1999 decreased $2,874,000. The remaining
net increase is a result of the increased leasing activities and the reduction
of management general and administrative expenses. Net operating income as a
percent of total revenues was 9.6% for the three months ended March 31, 2000 as
compared to 2.5% for the three months ended March 31, 1999.
Interest expense decreased to $6,527,000 for the three months ended
March 31, 2000 from $7,306,000 for the three months ended March 31, 1999, a
decrease of $779,000. The decrease in interest expense is reflective of the
lower average amount of outstanding borrowings during the first quarter of 2000
as compared to the first quarter 1999.
Net loss decreased to $621,000 for the three months ended March 31,
2000 from $3,908,000 for the three months ended March 31, 1999 primarily as a
result of an increase of $884,000 in net operating income and an extraordinary
gain of $2,255,000 on extinguishment of a portion of the subordinated notes
payable.
<PAGE>
Liquidity and Capital Resources
The Company's primary uses of its capital resources include debt
service, capital expenditures and working capital. In addition, on a
discretionary basis, the Company utilizes its capital resources for the
development and acquisition of motel properties.
The Company's debt service requirements consist of the obligation to
make interest and principal payments on its outstanding indebtedness.
In January 2000, the Company borrowed $1.7 million at prime
plus .5% with monthly principal payments of $212,500 due October 1, 2000.
In March 2000, the Company repurchased an additional $10.5
million of the 12% Senior Subordinated Notes from an
affiliate for a net gain of $3.7. As part of the transaction the Company assumed
a $4.4 million margin account liability with an annual interest rate of 9% paid
monthly and due on demand.
The Company believes it has or will be able to obtain adequate
resources to meet its near-term maturing debt and other obligations.
The Company's capital expenditure requirements principally include
capital improvements and refurbishment of its lodging facilities as part of its
ongoing operating strategy to provide well-maintained facilities. The Company
made capital expenditures (exclusive of acquisitions and development of
properties) of $1,781,000 and $2,306,000 for the three months ended March 31,
2000 and 1999, respectively. In addition, as of March 31, 2000, the Company had
$2,028,000 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 three months ended March 31, 2000, cash and cash equivalents
increased $1,551,000. This increase consisted of $388,000 of funds provided by
investing activities and $3,703,000 of funds provided by financing activities
and $2,450,000 of funds used in operations. Net investing activities of $388,000
include: $311,000 of cash utilized for motel development and $1,781,000 expended
on refurbishment of existing properties, offset by $2,657,000 of cash provided
from the sale of investment properties and collections on mortgage and other
notes receivable and a change in cash restricted for refurbishment of $177,000.
Cash used in financing activities includes: $2,623,000 of cash utilized to repay
indebtedness; and $253,000 of cash used for deferred financing costs and other
items offset by $6,579,000 from proceeds from notes payable.
Impact of Year 2000
The Company has had no material effects as a result of the year 2000
implementation.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various legal proceedings arising in the
ordinary course of business. The Company does not believe that any of these
actions, either individually or in the aggregate, will have a material adverse
effect on the Company's business, results of operations or financial condition.
See Note 5 of the Notes to the Condensed Consolidated Financial Statements.
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:
Not Applicable
(b) Reports on Form 8-K:
Not Applicable
<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.
MOA HOSPITALITY, INC.
December 1, 2000 By: /s/ Kurt M. Mueller
-------------------------------------
Kurt M. Mueller
President and Chief Financial Officer
December 1, 2000 By: /s/ Blane P. Evans
-------------------------------------
Blane P. Evans
Secretary and Treasurer
