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 SEPTEMBER 30, 2003, 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
_______ _______
Indicate the number of Shares outstanding of each of the Issuer's classes
of Common Stock, as of the close of November 10, 2003.
Class Outstanding at September 30, 2003
______ _______________________________
Common Stock - $.50 par value 1,493,642 shares
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2003 and JUNE 30, 2003
ASSETS
September 30, June 30,
2003 2003
(Unaudited) (a)
Current Assets:
Cash $ 1,219,716 $ 1,161,986
Accounts and notes receivable 147,521 139,442
Inventories 4,707 4,483
Prepaid expenses 28,078 43,030
Notes receivable 30,000 30,000
Total current assets 1,430,022 1,378,941
Property, Plant and Equipment:
Land 836,868 820,553
Building and improvements 5,990,929 6,005,920
Furniture and equipment 1,420,964 1,400,047
Construction in progress 224,016 211,870
Less accumulated
depreciation
and amortization 1,423,501 1,345,436
Property, plant and
equipment - net 7,049,276 7,092,954
Other Assets:
Other assets 299,799 363,740
Total other assets 299,799 363,740
Total Assets $ 8,779,097 $ 8,835,635
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 2003 and JUNE 30, 2003
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
2003 2003
(Unaudited) (a)
Current Liabilities:
Accounts payable $ 187,029 $ 163,427
Accrued liabilities 105,043 120,958
Taxes other than Federal
income taxes 145,428 192,571
Current portion of long-term
debt 153,290 153,290
Total current liabilities 590,790 630,246
Long-Term Liabilities:
Notes and mortgages payable 6,413,826 6,453,549
Total liabilities 7,004,616 7,083,795
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 (deficit) (8,766) (32,744)
Treasury stock, at cost (89,921
and 87,246 Shares) (40,825) (39,488)
Total stockholders' equity 1,774,481 1,751,840
Total Liabilities and
Stockholders' Equity $ 8,779,097 $ 8,835,635
(a) Financial information as of June 30, 2003 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.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
For the period of three months ended September 30, 2003 and 2002
Three Months Ended
2003 2002
Revenues: *
Rooms $ 757,560 $ 757,509
Food and beverage 17,612 21,540
Telephone 3,616 5,560
Rents 6,000 6,000
Other 3,958 5,886
Total revenues 788,746 796,495
Costs and Expenses:
Operating Departments:
Cost of sales 30,845 31,701
Salaries and wages 195,388 201,198
Other 65,935 62,613
General and Administrative 66,887 52,270
Advertising 60,931 64,976
Utilities 32,963 34,589
Repairs and Maintenance 17,361 20,724
Interest 135,949 131,055
Taxes and licenses 64,604 66,922
Insurance 16,800 8,909
Depreciation and Amortization 78,065 70,088
Total costs and expenses 765,728 745,045
Operating income (loss) 23,018 51,450
Interest income 961 56
Income from continuing operations 23,979 51,506
Discontinued operations
Income from operations of
the discontinued component - 249
Net Income before Income
Taxes 23,979 51,755
Income Taxes - -
Net Income $ 23,979 $ 51,755
Earnings per Share $ .02 $ .03
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
* Financial information restated for effects of discontinued operations.
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three months ended September 30, 2003 and 2002
2003 2002
Cash Flows From Operating Activities:
Net income $ 23,979 $ 51,755
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 78,065 82,157
(Increase) decrease in other assets 63,941 12,021
(Increase) decrease in current assets:
Accounts receivable (8,079) (34,186)
Inventories (224) 243
Prepaid expenses 14,952 17,484
Increase (decrease) in current
liabilities:
Accounts payable 23,603 (38,066)
Accrued liabilities (15,915) (44,908)
Taxes other than Federal income tax (47,143) (78,865)
Total adjustments 109,200 (84,120)
Net Cash Provided by (Used in)
Operating Activities 133,179 (32,365)
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UPTOWNER INNS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the three months ended September 30, 2003 and 2002
2003 2002
Cash Flows From Investing Activities:
Proceeds from sale of real estate $ - $ 1,770,072
Capital Expenditures (34,388) (44,686)
Net cash provided by (used in)
investing activities (34,388) 1,725,386
Cash Flows From Financing Activities:
Purchase of Treasury Stock (1,337) -
Payment on notes and mortgages (39,724) (1,683,599)
Net cash used in
financing activities (41,061) (1,683,599)
Net Increase in Cash
and Cash Equivalents 57,730 9,422
Cash and Cash Equivalents at Beginning of Year 1,161,986 803,660
Cash and Cash Equivalents at End of Period $ 1,219,716 813,082
Supplemental Disclosures of Cash Flow Information:
Cash Paid During The Period For:
Interest $ 135,949 $ 129,982
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
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, 2003.
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UPTOWNER INNS, AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
2. CONTINGENCY
The Company was a defendant in a lawsuit filed by the seller of a
parcel of property, which was to be used to construct a Holiday Inn Hotel,
for breach of contract and for failure to purchase the land and develop
the hotel. The suit also alleged violations of confidentiality
agreements. The Company filed a countersuit alleging fraud,
misrepresentations, and breach of contract. The Company maintained that
the results of the soil compaction studies revealed that the land was not
suitable for its intended purpose. A settlement agreement was reached in
August, 2003. Under the terms of the settlement, the Company received its
deposit totaling $60,000 back from the seller and all claims between the
two parties have been dismissed.
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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 SEPTEMBER 30, 2003 AND 2002
The Holiday Inn Hotel and Suites room revenues did not fluctuate in
the three months ended September 30, 2003 relative to the comparable
period in 2002. The Holiday Inn Hotel and Suites' average occupancy
percentage for the three months ended September 30, 2003 was 76.95%, a
small increase of .5% relative to the comparable period in 2002. The
18.2% decrease in food and beverage revenues in the quarter ended
September 30, 2003 relative to the comparable period in 2002, is largely
due to the complimentary meals provided to hotel guests as an incentive to
stay at the property.
Total cost and expenses have increased a modest 2.8% primarily due
to general and administrative expenses and depreciation expense. The
increase in general and administrative expenses is due in large part to
the increased legal fees related to the lawsuit discussed previously in
the contingency section of this report. The depreciation expense has
increased due to the addition of fixed assets in fiscal year ended June
30, 2003.
No provision for income tax expense for the three months ended
September 30, 2003 is reflected due to the large amount of net operating
loss carryforward ($ 994,955) to be applied to taxable income, which has
been provided for in previous periods and included in deferred tax assets.
LIQUIDITY
Liquidity, as measured by current assets divided by current
liabilities, has increased from 2.19 at June 30, 2003 to 2.42 at September
30, 2003.
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LIQUIDITY, CON'T.
Although liquidity has increased for this time period, it is likely
that the Company's liquidity position will gradually decrease in the next
two to three years. Management estimates that business will fall
approximately 10% over this time period due to construction work near the
hotel. The construction work for the new Pullman Square project is going
on right next to the hotel, and has caused many guests to leave the
Holiday Inn property due to excessive early morning noise. Many guests
have also left due to the lack of parking that the construction work has
caused.
There are also plans to add a new Holiday Inn property in
Barboursville, WV, but will probably be another one to two years before
construction for that site begins. The Company has purchased the
franchise agreement from Holiday Inn, and has also purchased a portion of
the land needed for the new construction.
The Company obtained a valuation of the Company's common stock. The
purpose of the valuation was to provide the Company's management with
information to be used in a going private transaction whereby the Company
is seeking shareholder approval for a reverse stock split and providing a
cash payment for fractional shares of common stock. The transaction would
have the effect of reducing the number of shareholders from 1,392 to 11
and the Company would no longer file reports with the Securities and
Exchange Commission.
CAPITAL RESOURCES
The Company's cash has modestly increased 4.9% for the three months
ended September 30, 2003.
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. The Company planned on constructing a hotel on the
site. 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 projected operational date was set at July,
2004, before problems were found with the land fill at the construction
site. In February, 2003, Uptowner Inns, Inc. pulled out of the project.
In addition to the $60,000 deposit, Uptowner Inns, Inc. had incurred other
expenses related to the property for approximately $99,0000, and also lost
the $50,000 they paid to Holiday Inn for the franchise agreement. On
February 19, 2003, Uptowner Inns, Inc. received notice from the Huntington
Municipal Development Authority that a law suit had been filed. See
"Contingency" in notes to Consolidated Financial Statements for additional
information on the lawsuit.
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CAPITAL RESOURCES, CON'T.
In February, 2003, the Company spent $200,000 acquiring .688 acre
and a 10' easement for additional expansion. There is no current
commitments or obligations that exist for this property.
ITEM 4: 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 subsidiary) required to be included in the Company's
periodic SEC filings.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
The Company was a defendant in a lawsuit filed by the seller of a
parcel of property, which was to be used to construct a Holiday Inn Hotel,
for breach of contract and for failure to purchase the land and develop
the hotel. The suit also alleged violations of confidentiality
agreements. The Company filed a countersuit alleging fraud,
misrepresentations, and breach of contract. The Company maintained that
the results of the soil compaction studies revealed that the land was not
suitable for its intended purpose. A settlement agreement was reached in
August, 2003. Under the terms of the settlement, the Company received its
deposit totaling $60,000 back from the seller and all claims between the
two parties have been dismissed.
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Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
31.1 Certification pursuant to 18 U.S.C. Section 302 of the
Sarbanes-Oxley Act of 2002 for Carl E. Midkiff, Chief
Executive Officer.
31.2 Certification pursuant to 18 U.S.C. Section 302 of the
Sarbanes-Oxley Act of 2002 for David Robinson, Chief
Financial Officer.
32.1 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.
32.2 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 September 30, 2003.
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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 E. Midkiff,
CEO and Secretary
November 12, 2003
By /s/ David Robinson,
CFO and Treasurer
November 12, 2003
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