SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED DECEMBER 31, 2002, COMMISSION FILE NUMBER 0-1957
UPTOWNER INNS, INC.
(Exact Name of Registrant as Specified in its Charter)
West Virginia 55-0457171
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
741 5th Avenue, Huntington, West Virginia 25701
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code (304) 525-8162
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and,
(2) has been subject to such filing requirements for the past 90
days.
X Yes No
_______ ______
Indicate the number of Shares outstanding of each of the Issuer's classes
of Common Stock, as of the close of the period covered by this report.
Class Outstanding at December 31, 2002
______ _______________________________
Common Stock - $.50 par value 1,568,011 shares
- 1 -
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 2002 and JUNE 30, 2002
ASSETS
December 31, June 30,
2002 2002
(Unaudited) (a)
Current Assets:
Cash $ 973,714 $ 803,660
Accounts and notes receivable 145,677 62,867
Inventories 6,273 6,145
Prepaid expenses 30,454 61,173
Deferred tax asset 132,098 132,098
Property held for sale - 1,770,073
Total current assets 1,288,216 2,836,016
Property, Plant and Equipment:
Land 1,128,940 1,202,786
Building and improvements 7,060,199 7,385,301
Furniture and equipment 1,349,076 1,276,650
Construction in progress 136,092 42,567
Less accumulated
depreciation
and amortization 1,717,435 1,842,424
Property, plant and
equipment - net 7,956,872 8,064,880
Other Assets:
Deposits and other 210,589 228,177
Total Assets $ 9,455,677 $ 11,129,073
- 2 -
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 2002 and JUNE 30, 2002
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
2002 2002
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 302,390 $ 181,386
Accrued liabilities 120,961 134,024
Taxes other than Federal
income taxes 271,875 327,869
Unearned revenue - 48,461
Current portion of long-term
debt 170,430 253,430
Total current liabilities 865,656 945,170
Long-Term Liabilities:
Notes and mortgages payable 6,916,200 8,542,621
Total liabilities 7,781,856 9,487,791
Stockholders' Equity:
Common stock - par value
$.50 per share; authorized
5,000,000 shares; issued
1,583,563 shares 791,782 791,782
Additional paid-in capital 1,032,290 1,032,290
Retained earnings (140,142) (172,681)
Treasury stock, at cost (15,552
Shares in 2002) (10,109) (10,109)
Total stockholders' equity 1,673,821 1,641,282
Total Liabilities and
Stockholders' Equity $ 9,455,677 $11,129,073
(a) Financial information as of June 30, 2002 has been derived from the
audited, consolidated financial statements of the registrant.
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
- 3 -
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the periods of three and six months ended December 31, 2002 and 2001
Three Months Ended Six Months Ended
2002 2001 2002 2001
Revenues:
Rooms $ 698,159 $ 750,861 $ 1,455,668 $ 1,653,301
Food and beverage 21,370 29,411 42,910 65,909
Telephone 4,577 2,079 10,137 9,394
Rents 49,970 53,367 108,776 107,703
Other 7,088 6,568 12,974 14,541
Total revenues 781,164 842,286 1,630,465 1,850,848
Costs and Expenses:
Operating Departments:
Cost of sales 32,453 31,090 64,154 70,952
Salaries and wages 191,822 197,032 393,584 439,839
Other 66,066 64,882 128,679 131,107
General and Administrative 94,911 86,271 156,468 147,730
Advertising 56,888 51,232 121,864 111,273
Utilities 34,221 57,165 74,307 123,282
Repairs and Maintenance 27,776 28,655 57,907 53,873
Interest 147,828 200,382 287,837 386,418
Taxes and licenses 73,108 82,150 143,910 175,836
Insurance 11,685 18,295 23,493 36,590
Depreciation and Amortization 78,981 109,321 161,138 218,478
Total costs and expenses 815,739 926,475 1,613,341 1,895,378
Operating income (loss) (34,575) (84,189) 17,124 (44,530)
Other Income:
Interest income 0 0 56 0
Gain on sale of assets 15,359 - 15,359 -
Total other income 0 0 15,415 0
Net Income (Loss) before Income
Taxes (19,216) (84,189) 32,539 (44,530)
Income Taxes 0 0 0 0
Net Income (Loss) $ (19,216) $ (84,189) $ 32,539 $ (44,530)
Earnings (Loss) per Share $ (0.01) $ (.05) $ .02 $ (.03)
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
- 4 -
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the six months ended December 31, 2002 and 2001
2002 2001
Cash Flows From Operating Activities:
Net income (loss) $ 32,538 $ (44,530)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 161,138 218,478
Gain on sale of assets (15,359) -
(Increase) decrease in deposits 17,589 (61,401)
(Increase) decrease in current assets:
Accounts receivable (82,809) (25,579)
Inventories (128) 120
Prepaid expenses 30,720 24,051
Increase (decrease) in current
liabilities:
Accounts payable 121,005 (40,844)
Accrued liabilities (61,524) 60,187
Taxes other than Federal income tax (55,993) 64,805
Total adjustments 114,639 239,817
Net Cash Provided By Operating Activities 147,177 195,287
- 5 -
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the six months ended December 31, 2002 and 2001
2002 2001
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ 1,930,072 $ -
Capital Expenditures (197,774) (25,370)
Net cash provided in (used in)
investing activities 1,732,298 (25,370)
Cash Flows From Financing Activities:
Loan proceeds 0 0
Payment on notes and mortgages (1,709,421) (287,361)
Net cash used in
financing activities (1,709,421) (287,361)
Net Increase (Decrease) in Cash
and Cash Equivalents 170,054 (117,444)
Cash and Cash Equivalents at Beginning of Year 803,660 186,912
Cash and Cash Equivalents at End of Period $ 973,714 69,468
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 249,133 $ 337,920
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
- 6 -
UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
1. BASIS OF PRESENTATION
The financial statements presented reflect Uptowner Inns, Inc. and its
consolidated subsidiary, Motel and Restaurant Supply.
The foregoing statements are unaudited; however, in the opinion of
management, all adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial statements have been
included. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for a full
year or any other interim period. A summary of the Corporation's
significant accounting policies is set forth in Note 1 to the Consolidated
Financial Statements in the Corporation's Annual Report to shareholders
and Form 10-K for June 30, 2002.
- 7 -
UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2002
2. CONTINGENCY
None.
- 8 -
UPTOWNER INNS, INC. AND SUBSIDIARY
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters disclosed herein may be forward-looking
statements that involve risks and uncertainties, including the facilities
utilization, costs associated with maintaining the operations, liquidity
issues, and other risks. You can identify these statements by such
forward-looking words as "may," "will," "expect," "plan" and similar
words. Actual strategies and results in the future
may differ materially from those management currently expects.
Forward-looking statements represent management's judgment as of the
current date. The Company disclaims, however, any intent or obligation
to update any forward-looking statements contained in this Form 10-Q.
RESULTS OF OPERATION
THREE MONTHS ENDED DECEMBER 31, 2002 AND 2001
Due to the closing of the Travelodge property in January 2002, room
revenues have declined 7.02% in the three months ended December 31, 2002
relative to the comparable period in 2001. The Holiday Inn Hotel and
Suites room revenues increased 10.91% in the three months ended December
31, 2002 relative to the comparable period in 2001 (not taking in
consideration the room revenue generated by the Travelodge property). The
Holiday Inn Hotel and Suites' average occupancy percentage for the three
months ended December 31, 2002 was 70.55%, an increase of 7.92% relative
to the comparable period in 2001. This increase is due largely in part to
construction work in the Huntington area, and the housing of many of these
construction workers. The 27.34% decrease in food and beverage revenues
in the quarter ended December 31, 2002 relative to the comparable period
in 2001, is relative to the overall decrease in room sales and the closing
of the Travelodge property.
Total cost and expenses have decreased 12.0% primarily due to
interest expense attributed to the refinancing of the Holiday Inn Hotel
and Suites property in January 2002 and the payoff of the loans related to
the Travelodge property sold July 3, 2002. In addition, an overall
decrease in expenses is related to the closing and sale of the Travelodge
property.
SIX MONTHS ENDED DECEMBER 31, 2002 AND 2001
Room Revenues have decreased by 11.95% in the six months ended
December 31, 2002 relative to the comparable period in 2001. Food and
Beverage revenues have decreased by 34.90% in the six months ended
December 31, 2002 relative to the comparable period in 2001. These
differences, as well as the variances in expenses, are due to the
explanations above for the three month period ending December 31, 2002.
- 9 -
LIQUIDITY
The liquidity, as measured by current assets divided by current
liabilities, has decreased from 3.00 at June 30, 2002 to 1.49 at December
31, 2002. This decline is a result of selling the Travelodge property in
July of 2002. On June 30, 2002, this property was being classified as
Property Held for Sale in the current asset section of the balance sheet.
Existing loans with balances totaling $1,633,521 as of June 30, 2002 were
paid off upon closing.
CAPITAL RESOURCES
A Letter of Intent between Uptowner Inns, Inc. and Huntington Area
Development Corporation was signed on November 16, 2001, for the purchase
of 2.2 acres of land at the Kinetic Park Commercial Area for a purchase
price of $350,000 per acre. The company planned on constructing a hotel
on the site. Huntington Area Development Corporation and the company
executed a real estate purchase and sale agreement on August 19, 2002
("Purchaser") for the purchase of this property. Under the terms of the
agreement, the purchase price for the property is $875,000. The company
made a $10,000 deposit on the property. The Purchaser had the right and
option for a period of 45 days commencing on August 19, 2002, to enter the
property to conduct physical inspections. At the expiration of the
inspection period, the company paid the sum of $50,000 as an additional
deposit. The closing was originally scheduled for November 22, 2002, and
later extended to February 1, 2003. The projected cost of the project is
$5,809,000, with $4,500,000 being financed. The projected operational
date was set at July, 2004, before problems were found with the land fill
at the construction site. The remaining balance due of $815,000 has been
placed in escrow until the land fill problem has been resolved.
The apartment building located at 1340 Fourth Avenue, in Huntington,
West Virginia was sold at auction on September 12, 2002, for $361,000, and
closed in January, 2003.
The apartment building located at 1416-18 Fourth Avenue, in
Huntington, West Virginia, was sold at auction on September 12, 2002, for
$160,000, and closed in October, 2002. The property was subject to a
mortgage in favor of Betty M. Dove, in the original amount of $76,000, 10%
interest, maturing June 2002, the balance of which was $1,031 at June 30,
2002.
- 10 -
CAPITAL RESOURCES CONTINUED
The apartment building located at Fourth Avenue, in Huntington, West
Virginia, was sold at auction on September 12, 2002, for $752,000, and
closed in January, 2003. The property was subject to a mortgage in favor
of West Virginia Housing Development Fund in the original amount of
$500,000, 5.5% rate of interest, maturing November 2018, the balance of
which was $399,021 at June 30, 2002.
ITEM 4: CONTROLS AND PROCEDURES
PART I: EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the company
carried out an evaluation, under the supervision and with the
participation of the company's management, including the company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the
Chief Executive Officer and the Chief Financial Officer concluded that the
company's disclosure controls and procedures are effective in timely
alerting them to material information relating to the company (including
its consolidated subsidiaries) required to be included in the company's
periodic SEC filings.
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
99.1 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for Carl E. Midkiff, Chief Executive
Officer.
99.2 Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002 for David Robinson, Chief Financial
Officer.
b. The Company was not required to file Form 8-K for the quarter
ended December 31, 2002.
- 11 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant) UPTOWNER INNS, INC.
By /s/ Carl Midkiff,
CEO and Secretary
February 10, 2003
By /s/ David Robinson,
CFO and Treasurer
February 10, 2003
- 12 -
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Carl E. Midkiff, Chief Executive Officer, certify that:
1. I have reviewed this report on Form 10-Q of Uptowner Inns,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures
to ensure that material information relating to
the registrant, including its consolidated
subsidiaries is made known to us by others within
those entities, particularly during the period in
which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
- - 13 -
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors:
a) all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a
significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
/s/ Carl E. Midkiff
Chief Executive Officer
February 10, 2003
- - 14 -
CERTIFICATIONS
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, David Robinson, Chief Financial Officer, certify that:
1. I have reviewed this report on Form 10-Q of Uptowner Inns,
Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officer and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries is
made known to us by others within those entities,
particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within
90 days prior to the filing date of this quarterly
report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;
- - 15 -
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors:
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report
financial data and have identified for the
registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated
in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
/s/ David Robinson
Chief Financial Officer
February 10, 2003
- - 16 -